Central States’ Benefit Suspension Application Denied

Authored by Dannae L. Delano

May 24, 2016

This month, the U.S. Treasury denied Central States Pension Fund’s plan to rescue the fund from insolvency. One of the biggest private pension funds in the country, with benefits for about 407,000 people, the Central States Pension Fund is almost out of money.

What happened?

Last fall, an application was submitted on behalf of the $17.8 billion Central States Pension Fund requesting approval to reduce benefits under the Multiemployer Pension Reform Act of 2014 (MPRA). Central States sought the proposed cuts to head off insolvency.

In consultation with the Pension Benefit Guaranty Corporation (PBGC) and the U.S. Department of Labor (DOL), the U.S. Treasury denied the application because:

• the Central States’ proposed benefit suspensions are not reasonably estimated to allow the plan to avoid insolvency;
• the application that was submitted failed to demonstrate satisfaction of the requirement that reductions be equitably distributed amongst participants; and
• the notices submitted were not understandable to the average plan participant.

The Treasury also issued correspondence to members of Congress explaining its denial and criticizing the MPRA as being too restrictive and needing reform.

The IRS also recently finalized the regulations governing benefit suspensions under a multiemployer pension plan including a revised application procedure in Revenue Procedure 2016-27.

Multiemployer plan sponsors and those employers who are or were participants in the Central States Plan, including vested retirees, should be aware of these matters so that they can determine how it will affect their plan participants if at all.

If you have any questions about multiemployer plan issues or any other employee benefits matter, please do not hesitate to contact Dannae Delano or Dave Frenzia.

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