American Rescue Plan Act of 2021 ("ARPA")
TIMELINE FOR TRUSTEE DECISION REGARDING SPECIAL FINANCIAL ASSISTANCE
Status as of March 30, 2022
On March 30, 2022, the Trustees filed an application with the Pension Benefit Guarantee Corporation (“PBGC”) for Special Financial Assistance (“SFA”) under the American Rescue Plan Act (“ARPA”). PBGC now has 120 days to review the submission. If approved as filed, the Pension Fund expects to receive the grant within 30 – 90 days following the date of approval.
If approved, the Pension Fund would issue a lump sum make-up payment to participants and beneficiaries who had their benefits reduced and restore benefits to pre-suspension levels no later than 90-days after SFA is paid.
If the application is approved, the Pension Fund will issue individual notices with pertinent information.
TRUSTEES UNANIMOUSLY APPROVE FILING AN APPLICATION FOR RECEIPT OF SPECIAL FINANCIAL ASSISTANCE
Status as of March 3, 2022
The Board of Trustees met on March 3, 2022 to review actuarial and financial reports needed for a comprehensive evaluation of the Special Financial Assistance ("SFA") under ARPA. After due consideration, the Trustees voted unanimously to file an application with the Pension Benefit Guaranty Corporation requesting the maximum amount allowed. Barring unforeseen delay, the application should be filed by the end of March.
In prior updates, the Pension Fund commented on the restrictive Interim Rules which were a cause for concern. While PBGC still has not yet released the Final Rules, we were provided assurances that by filing for SFA under the Interim Rules, we would nevertheless be entitled to any additional SFA amounts which become available under the Final Rules.
In summary, based on projections of improved future solvency, the Trustees determined that filing an application for SFA would be in the best interest of all participants. PBGC is required to grant or deny applications within 120 days of filing. If approved, PBGC has 90 days to pay SFA to the Pension Fund. We are encouraged that upon the receipt of SFA, the Pension Fund will be able to restore benefits to the pre-suspension level and provide lump sum make-up payments within 90 days.
Further details will be provided after the SFA application is completed and filed.
Status as of January 18, 2022
Since our last communication, the Pension Fund has continued to gather all data, review all applications, follow up with outside sources, research regulatory requirements to ensure completeness and is moving forward with our consideration of a Special Financial Assistance (SFA) program application.
As stated in our September Update, the Fund only recently became eligible to submit an application on January 1, 2022. No large and diversified fund can assemble an application on the first date eligible due to requirements concerning the determination of the market value of Fund assets as of December 31st. For example, the Fund has over 23 investment portfolios which will be issuing year-end statements over the next 6 weeks. Some of those investments are complex financial instruments which are not traded on daily markets and can only be valued with reference to comparable trades or by a third party valuation firm.
In addition to the need to await these financial reports the Fund Office is continuing to:
- update many of the 100 collective bargaining agreements as they are negotiated in order to be able to accurately project future employer contribution income, and
- verify the life status and amounts previously suspended for over 8,000 retirees.
Recently, two actuarial valuations were completed in December 2021 which lay the groundwork for the determination of future cash flow projections necessary in determining the amount of the Special Financial Assistance requested. These reports demonstrate that had the Fund not instituted the MPRA suspensions, the Pension Fund would have gone insolvent in 2030.
In a prior update, we outlined the complexity of the July, 2021 Interim Final Rule in which the PBGC interpreted the SFA legislation. We, along with other funds, disagreed with certain aspects of their interpretation which might reduce the amount of SFA below the amount Congress intended. The major formula concern is that the SFA amount is determined assuming a fund will earn approximately 5.3% return on the SFA dollars received, but once received a fund is required to invest SFA monies in conservative bonds which currently bear low or negative real yields. This disconnect jeopardizes the intent of the legislation which is to allow the Fund to pay all benefits through 2051.
Our expectation is that PBGC will issue the Final Rule sometime in January providing clarity. In the meantime, the Trustees look forward to having their actuarial and investment professionals complete their studies by the end of February and expect these reports will support formal action for the best interests of all participants – current and future covered employees, retirees and survivors. The Trustees intend to review these reports and to vote on filing an application which would take place no later than March 31, 2022.
We are constantly following the frequent status updates and technical FAQs posted on PBGC’s website - https://www.pbgc.gov/arp-sfa - and remind you that their site is the most complete and up-to-date informational resource available.
The Trustees will post updates concerning ARPA on this Website whenever new information becomes available.
TRUSTEES OF THE WESTERN PENNSYLVANIA TEAMSTERS AND EMPLOYERS PENSION FUND
Status as of September 21, 2021
The Board of Trustees provides this update on the Pension Fund’s ongoing and diligent activities relating to the Special Financial Assistance (“SFA”) program included in the American Rescue Plan Act of 2021 (“ARPA”), and to end rumor and speculation. Open or download the link seen here, Progress Report, for a summary of actions taken by this Pension Fund through mid-September 2021.
In reviewing this material, please keep in mind that while ARPA holds out the prospect of enabling the Fund to restore those benefits suspended under the August 2019 MPRA amendment, this Fund is not permitted to apply for Special Financial Assistance until after January 1, 2022. The Pension Benefit Guaranty Corporation (“PBGC”) sets the rules for determining how much money a plan can receive and is the federal agency responsible for ruling on applications. PBGC is required to approve or reject a plan’s application within 120 days of submission. Even if an application is approved, plans do not get the money until sometime after the approval. However, since this is a new law and a new function for PBGC, there is no precedent and no certainty as whether an application requesting the dollars needed to ensure long-term solvency would be approved.
The Board of Trustees began analyzing ARPA in mid-March 2021. Much was not understood until July 12, 2021, when PBGC published the rules laying out how much money plans could apply for. These rules were published on an “Interim” basis and PBGC has not indicated when the final rules will be released. The Pension Fund, as well as 102 other parties, submitted Comments to PBGC identifying several significant open questions requiring clarification. Until these open questions are answered, our actuary cannot calculate whether the amount available is enough to ensure long-term solvency and until that time, the Board of Trustees will not have all the facts and numbers needed for deliberation.
The Trustees are keenly aware that all participants have a reasonable expectation that the benefits promised will be paid and that many participants have planned their future in reliance on those expectations. The global economic collapse of 2008 confronted the Trustees with the grim reality that the Fund was projected to go insolvent in 2027 and that the Pension Fund would not be able to fully honor participants’ expectations after that date. The only option the government offered prior to ARPA was the MPRA benefit suspension tool. MPRA enabled the Pension Fund to reduce its overall benefit obligations by just enough to avoid the projected insolvency while providing a path by which all participants could reasonably expect receipt of remaining benefits for the indefinite future.
ARPA gives the Pension Fund a different option which could replace MPRA. The Board of Trustees will be required to carefully evaluate this option because it comes with conditions. After uncertainty over the facts and dollar amounts are clarified, the Trustees will need to balance the interests and expectations of current retirees and soon-to-be retirees with the interests and expectations of younger participants. The Pension Fund’s actuary has been testing alternative cash flow projections running out 30 or more years, using various assumptions regarding future financial resources and benefit obligations. The Board of Trustees needs to have accurate actuarial projections and investment forecasts before it deliberates on the hard decisions facing them.
Please understand that at this time the Pension Fund cannot provide answers to all the questions you need answered. The Trustees have a fiduciary duty to take actions in the best interests of all retirees, survivors, and participants, but only after all the facts and numbers are known.
We hope and expect that PBGC will promptly answer the open questions in the upcoming Final Rule or during the informal conferences we have scheduled with PBGC staff. Remember that even after SFA applications are filed, the answers are not known until PBGC accepts or denies the applications within 120-days after submission.
The Pension Fund will post updates concerning ARPA on this Website whenever new information becomes available.
BOARD OF TRUSTEES OF THE WESTERN PENNSYLVANIA
TEAMSTERS AND EMPLOYERS PENSION FUND
Last Updated September 21, 2021