Participants in the United Furniture Workers Pension Fund A, Nashville, Tenn., approved a rescue plan that calls for benefit reductions known as suspensions, according to a notice posted Monday on the Treasury Department website.
Treasury officials on July 21 approved the plan submitted under the Kline-Miller Multiemployer Pension Reform Act of 2014, conditional on a majority of eligible plan participants not rejecting it.
The pension fund identified 9,595 participants and beneficiaries eligible to vote, and delivered ballots to 9,273, according to the Treasury website. Of those, 21% voted to reject the suspension. While only 1,041 ballots were in favor of the reduction, the plan will take effect Sept. 1 because a majority of eligible voters receiving a ballot did not vote to reject it.
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.
PBGC officials said in an emailed statement that based on the vote results and the suspension moving forward, "we expect that the partition will move forward as well. The early financial assistance from the PBGC, together with benefit reductions that are required by law as a condition for receiving PBGC assistance, will avoid plan insolvency in the near term and improve the chances that the plan will remain solvent to pay benefits to participants over the long term," PBGC said.
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%.
Among participants, 70% were not affected by the cuts because of low benefits, and 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 Aug. 24 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.
