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Treasury denies Teamsters Local 469 bid to reduce pension benefits

Teamsters Local 469 Pension Plan, Hazlet, N.J., has been denied its Treasury Department application to reduce benefits for participants, including retirees.

The pension fund had applied March 30 under the Multiemployer Pension Reform Act of 2014, which allows trustees to reduce benefits of deeply underfunded pension plans that would be insolvent within 15 years of when the application is approved, after they have tried all other means. The application proposed to begin the benefit cuts, known as suspensions, on Jan. 1, 2017.

In a letter Thursday to the board of trustees, Kenneth Feinberg, Treasury's special master overseeing the MPRA application process, said the pension fund's assumptions about investment returns and spousal survival benefit takeup “are not reasonable,” thereby failing the law's key test that benefit cuts be reasonably estimated to avoid insolvency.

The pension fund assumed an annual investment return of 7.25% for the entire 45 years projected in the application to achieve solvency. Mr. Feinberg said those assumptions were not reasonable because they did not use appropriate investment forecast data, were overly optimistic, and inappropriate given a negative cash flow and other factors.

Teamsters Local 469 Pension Plan has 1,781 total participants, 128 of them active, assets of $122.6 million and liabilities of $279.9 million for a funded status of 43.8% as of Dec. 31, 2014, according to its Form 5500 filing. With significantly more inactive participants than active, it is likely to require financial assistance from the PBGC by 2029. The plan has been in critical status for eight years and is projected to become insolvent within the next 19 years.