Road Carriers Local 707 Pension Fund, Hempstead, N.Y., was denied permission by the Pension Benefit Guaranty Corp. to partition the plan and create a new retirement plan for terminated vested and retired participants. Plan trustees also were advised that their application to the Treasury Department to suspend benefits will be denied, a June 15 trustees' letter to participants states.
In its June 10 letter denying the partition request, the PBGC said the application failed to demonstrate that the plan would remain solvent, which is a requirement of the Multiemployer Pension Reform Act of 2014, and was based on “unreasonably optimistic assumptions” about future contributions and the number of active participants, as well as industry conditions and disparate contribution rates between the dominant employer, YRC Worldwide Inc., and other employers in the plan. “In this case, use of an even slightly less optimistic assumption regarding the plan's contribution base units would cause the plan to fail to satisfy the statutory requirement” to remain solvent, the PBGC letter said.
The pension fund listed assets of $27.8 million in its MPRA application to the Treasury Department on March 15, and proposed to suspend benefits as of July 1, 2016, because the plan was projected to be insolvent by February 2017.
In their June letter to participants, plan trustees said their application reduced benefits to 110% of PBGC guarantee levels, except for older or disabled participants, but that with the denials, benefits will be reduced to the PBGC maximum guarantee of $35.75 per month times years of service, regardless of age or disability status. The MPRA application said that in the event of a denial, active participants would not get future accruals.
“We strongly disagree with the PBGC's determination,” the trustees wrote. While partition might not have prevented insolvency at some point, “the federal government's actions denying the application virtually assures it will happen in the coming months, absent other relief,” said the trustees, who also complained that it took 18 months for regulators to produce regulations for MPRA applications. The officials said they will work with legislators and union officials “to come up with a real solution,” and called on participants to help in the lobbying effort.
Fund manager Kevin McCaffery was not available to comment.