Iron Workers Local 17 Pension Fund, Cleveland, on Friday received permission from the Treasury Department to cut benefits for participants, including retirees, as part of a proposed rescue plan.
It is the first application approved by Treasury under the Multiemployer Pension Reform Act of 2014, which allows trustees of deeply underfunded pension plans that would be insolvent within 15 years from the time the plan is implemented to reduce benefits after they have tried all other means.
The pension fund had $91.9 million in assets and $223.2 million in liabilities as of April 30, 2014, for a funding ratio of 41%, according to its most recent Form 5500 filing. Of its 2,064 participants, 640 are active. The plan is projected to become insolvent in 2032.
The MPRA application submitted to the Treasury Department on Dec. 23, 2015, called for reducing benefits “indefinitely” to allow the plan to remain solvent with enough assets to pay the reduced level of benefits.
Kenneth Feinberg, Treasury's special master overseeing the MPRA application process, said in a letter to trustees Friday that the notice is not final authorization to make the changes, and that the next step is for pension fund participants to vote on the proposed plan. MPRA cuts can be no lower than 110% of the Pension Benefit Guaranty Corp.’s guarantee, which is less than $13,000 per retiree per year. Disabled or older retirees have further protections.