United Furniture Workers Pension Fund A, Nashville, Tenn., won approval from the Treasury Department to cut benefits for participants, including retirees.
The approval Thursday came as part of a rescue plan submitted under the Kline-Miller Multiemployer Pension Reform Act of 2014.
It is the second MPRA approval and the first one to include a partition, which calls for the Pension Benefit Guaranty Corp. to provide financial assistance for a new successor pension plan to be overseen by the pension fund's trustees.
Both benefit reductions and the partition were required to keep the plan solvent, which is a condition for MPRA approval. Without those, the pension fund was projected to be insolvent in 2021.
As of Jan. 1, plan assets were $51.3 million and liabilities were $189 million, for a funding ratio of 27%.
The next step is for participants to vote on the rescue plan, with results due in three weeks. Since 70% of participants are not affected by the cuts because they already are within 110% of the PBGC guarantee, the floor for benefit cuts, the plan is expected to be approved.
The remaining 30%, roughly 3,000 people, will see an average 12.7% reduction in their monthly benefit, beginning Sept. 1.
The new partition pension plan, conditionally approved Thursday by the PBGC pending the participant vote, will pay benefits for terminated vested participants and 56% of the retirees. Other retirees and active participants will remain in the original pension fund, according to the application on the Treasury Department's website.