The Teamsters Central States, Southeast & Southwest Areas Pension Fund, Rosemont, Ill. (Pension Fund), is seeking permission to cut benefits for participants, including retirees, as part of a rescue plan proposed last week that awaits approval from the U.S. Department of the Treasury (Treasury Department). The Pension Fund had assets of $17.8 billion as of Dec. 31 and is projected to become insolvent in 2026. Any benefit cuts will be effective July 1, 2016 if approved by both the Treasury Department and the plan participant vote.
Central States launched a new website for its rescue plan to save the underfunded Pension Fund. Thomas Nyhan, Executive Director and General Counsel for the Pension Fund, said in a statement released Friday that the rescue plan is the only way to save the troubled Pension Fund.
The Multiemployer Pension Reform Act of 2014 allows trustees of deeply underfunded pension funds that would be insolvent within 15 years to reduce benefits, even for current retirees, after they have tried all other means. Cuts can be no lower than 110% of the Pension Benefit Guaranty Corp.’s (PBGC) guarantee. Disabled or older retirees have further protections, but participants whose employers terminated contributions and failed to pay withdrawal liability will take the first cut down to the minimum 110% of the PBGC guarantee.
The Pension Fund plan proposes that terminated participants with fewer than 20 years of service credit get the largest reduction of benefits, compared to retirees, active participants, and terminated participants with 20 or more years of service. Active participants can continue to earn pension credits of 0.75% of contributions (down from the current 1%) and re-employment restrictions on retirees are lifted.
The Treasury Department will post the proposed rescue plan shortly and allow for public comments. Treasury Department officials have up to 225 days to review an application, and once approved, 30 days to administer a participant vote on the proposed benefit reductions. The law requires the Treasury Department to approve an application if a plan’s potential claims would cost the PBGC $1 billion or more.
If you have union employees who participate in the Central States Pension Fund, you should be aware of the proposal and what it will mean for them. If you have any questions regarding the Pension Fund rescue plan or any other employee benefits matter, please contact Dannae Delano, Corey Franklin, Dave Frenzia, or Rob Seigel.