THE PENSION FUND’S RESCUE PLAN HAS BEEN APPROVED
In September, 2018, the Trustees of the Western Pennsylvania Teamsters and Employers Pension Fund reached the difficult decision to apply to the U.S. Department of Treasury (“Treasury”) for approval of a benefit reduction rescue plan. After years of study, the Trustees came to the conclusion that it was in the best interest of all participants that benefits accrued through December 31, 2017 (including benefits currently in pay status) be equitably reduced so that the Pension Fund would not run out of money in the next 10 years.
The rescue plan was approved by Treasury on May 7, 2019 under the strict rules of the Multiemployer Pension Reform Act of 2014 (MPRA), a copy of the letter can be viewed here. We think you will agree that we are now one step closer to preserving the long term solvency of the Pension Fund. The Treasury Department has agreed that this rescue plan will enable active participants to continue earning benefits, as well as adding credibility to the Pension Fund’s assurance that it will be able to pay lifetime retirement benefits.
The national pension crisis which impacted the Pension Fund, as well as many other plans, presented the Trustees with three alternatives – (1) do nothing and let the Fund run out of money in 2028; (2) wait for Congress to provide financial assistance; or, (3) equitably reduce benefits to the minimum extent needed to enable the Pension Fund to attain long term solvency. No one wants to see pension benefits reduced, but realistically, there is no responsible alternative at this time. Perhaps if lawmakers enact some other solution, we could restore benefits, but unless and until new laws are enacted, this rescue plan needs to be implemented. Nevertheless, we continue to urge lawmakers to continue working on one of the several pending bills which may provide a better way of restoring pension solvency.
Treasury's approval of our application confirms that the rescue plan is based on realistic assumptions. The Treasury Department took the full 225 day allotted period to test the Pension Fund’s conservative investment earnings, contribution income and benefit payment assumption. Their conclusion was that the proposed benefit reductions would eventually bring the Pension Fund’s cash flow into balance and enable it to avoid the unthinkable catastrophic impact of plan insolvency.
The Pension Benefit Guaranty Corporation (PBGC) provides a maximum $35.75 monthly guarantee for each year of service if the Pension Fund goes insolvent; however, PBGC has projected that it will go insolvent in 2025 unless Congress backs that guarantee.
Approval of the proposed benefit reduction rescue plan by Treasury is the first step in the process. Sometime before June 6th, the Treasury Department will mail ballot materials and conduct a vote of all participants. Although there are those that may oppose the application, the Trustees believe that our participants understand the message that a no vote could mean no pension at all in the future. We are confident that voters will do the right thing and vote in favor of the Application.
By early June, eligible voters will have received a statement of how the proposed reduction, if implemented, will impact benefits as of August 1, 2019. For participants who have not yet commenced early or normal retirement benefits, these statements are estimates which show an August 1, 2019 snap shot of the impact of the reductions, but do not reflect factors such as additional service accruals, reciprocal benefits, qualified domestic relations orders, and pop-ups.