American Rescue Plan Act of 2021 ("ARPA")
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