Financial Assistance to Multiemployer Pension Plans
On September 9, 2021, the Trustees of the Local 641 Pension Fund submitted an application to the Pension Benefit Guaranty Corporation (“PBGC”) for special financial assistance (“SFA”) under the American Rescue Plan (“ARP”) Act of 2021. Local 641 Pension Fund became insolvent on March 1, 2021, and as such was eligible as part of priority group 1 to immediately apply for the SFA under the IFR.
The PBGC now has up to 120 days to review the application and advise the Local 641 Pension Fund whether it has been accepted or if additional information and documents are required. Should additional information and documents be required to support the application, the Local 641 Pension Fund’s professionals and office staff stand ready to immediately respond. Once the application is approved, the PBGC has 60 to 90 days to forward the SFA in a lump sum which monies are only to be used to restore benefits to their full levels going forward through 2051 and going back to the date that they were cut.
When a Fund’s application is accepted and funds received, retirees will receive correspondence from the Fund Office stating:
1. Current Monthly Pension Benefit
2. Reinstated Monthly Pension Benefit
3. Retroactive Payment amount to be paid in a lump sum for past benefits that were reduced or suspended due to the insolvency Cuts March 1, 2020, and March 1, 2021.
Reinstated monthly pension benefits are taxed under the same rules applicable to your monthly pension benefit before reinstatement.
If your retroactive payment is more than $750 or 10% of your annual rate of benefit payments, your retroactive payment is eligible for a rollover to an IRA for Federal income tax purposes. It is anticipated that the retroactive benefits will be paid ninety (90) days from the date the Pension Fund receives the SFA.
ARPA does not require multiemployer pension plans receiving SFA to repay the PBGC for any amount of SFA payments. Plans however may only use the financial assistance to pay for benefits and plan expenses. The failure to do so could result in the Fund being required to repay the financial assistance to the PBGC.
Local 641 Pension Fund is greatly appreciative of the anticipated assistance to be provided by the PBGC that will permit Local 641 Pension Fund to fully restore all suspended benefits retroactively to the dates they were cut for the hardworking Teamsters men and women and their families. However, we and other similarly situated Pension Funds have voiced our concerns on the PBGC Website as to the limitations on pension funds to only invest the SFA in investment grade bonds. The PBGC and the United States Department of Treasury presently will not permit pension funds such as the Local 641 Pension Fund with its limited assets of benefit contributions and withdrawal liability payments to be able to continue paying benefits uninterrupted through plan year 2051 when it is limited to investing the SFA in bonds which return significantly lower returns that what would be required to obtain in order to meet its continuing obligation to pay benefits and administrative expenses through plan year 2051.
Local 641 Pension Fund along with many other Funds and Professionals have voiced to the PBGC that expanding the permissible investment vehicles will respectfully allow pension funds to meet their obligations through 2051. We are hopeful that the Federal Government will seriously consider these much-needed changes and revise the regulations accordingly.
The PBGC is still reviewing comments from professionals and other interested parties like ourselves on concerns regarding the Interim Rules, such as the restrictions placed on the investment SFA as currently stated in the Interim Final Rule (“IFR”).
We will keep everyone updated on all aspects of this process as it progresses. Our professionals are all committed to making sure we stay on top of our application approval and restoring all our member’s hard earned pension benefits as soon as possible.
Board of Trustees
Karri Steinmacher - Pension Analyst