Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Defined Contribution East
    • 2023 ESG Investing
Breadcrumb
  1. Home
  2. DEFINED BENEFIT
September 04, 2017 01:00 AM

PBGC looking to partitions for relief

Agency hoping practice will help rescue ailing multiemployer plans

Hazel Bradford
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Eli Greenblum called partitioning 'a powerful tool' for trustees.

    The first approval for multiemployer pension fund benefit cuts with partitioning is raising hopes at the Pension Benefit Guaranty Corp. that more plans can be helped before landing on the agency's doorstep.

    On July 21, the United Furniture Workers Pension Fund A, Nashville, Tenn., won approval from the Treasury Department for a rescue plan submitted under the Kline-Miller Multiemployer Pension Reform Act of 2014. The rescue plan, which called for benefit reductions and partitioning — setting up a second plan to pay some benefits that the PBGC guarantees — aims to avoid insolvency projected for 2021.

    Both steps were necessary for the plan to win Treasury approval, which is only granted if the changes will make a pension fund solvent for at least 30 years. Taken together, PBGC officials said, benefit cuts and partitioning keep the United Furniture Workers' pension fund solvent in the near term and improve the odds that the plan will remain so and pay benefits over the long term.

    "Partitions are a powerful tool that trustees of 'critical and declining' plans should consider," said Eli Greenblum, chief actuary of the Segal Group in Washington,

    While the PBGC had some authority before the MPRA to facilitate partitions, it was rarely used. One big difference now is that struggling plans must cut benefits first, by enough to keep the plan solvent. By codifying that and other criteria, "MPRA really changed the way partition worked," said a PBGC official who declined to be identified.

    When the United Furniture Workers Pension Fund applied in January for the two-step process, the plan was 27% funded, with assets of $51.3 million and liabilities of $189 million. With the combination of partitioning and benefit reductions known as suspensions, those liabilities are projected to drop by $108 million, and stay around $80 million for the ​ foreseeable future.

    Under the plan, about 30%, or roughly 3,000 people, are seeing an average 12.7% reduction in their monthly benefit that began Sept. 1. Seventy percent of both plans' participants will not be affected.

    It was the second approval under MPRA and the first to include a partition, which calls for the PBGC to provide financial assistance for a new successor pension plan that will be overseen by the legacy pension fund's trustees.

    The new partition plan will pay benefits for terminated vested participants and 56% of the retirees. The remaining retirees and active participants will remain in the original, now better-funded plan.

    The agency is struggling with its own financial crisis, with a multiemployer insurance program that is projected to be insolvent by 2025. That doesn't give it a lot of resources, but facilitating partitions can help both the PBGC and smaller plans that are more likely to meet the criteria.

    One of the most important requirements for a partition is that it will not impair the agency's ability to help other plans. Plans' cash flow and other assumptions also have to pass muster to avoid adding to the agency's long-term losses.

    Partitioning is more equitable now, said the PBGC official, because all plan participants have to take cuts to reduce liabilities before the second plan is created. While trustees and PBGC officials have administrative tasks for both plans, "it is almost invisible to participants," he said.

    While acknowledging the difficult choice for participants, partitions are desirable because "they are not coming back to the PBGC" for a much larger share of assistance that could worsen its deficit, said another official privately.

    Eager to see if partitioning can help more plans, PBGC officials are now engaging in early negotiations with more potential MPRA application candidates. They expect to do 12 to 18 partitions over the next three years, as fewer MPRA candidates can avoid insolvency with benefit cuts alone, the PBGC official said.

    "The PBGC has limited resources, but has demonstrated willingness to provide sponsors with feedback to partition candidates," said Mr. Greenblum of Segal.

    "Plans are thinking about it in a much more concrete way. That has increased the number of plans consulting with us," said the PBGC official, who estimates that roughly 10% of the 100-plus plans already deemed critical and declining, and therefore eligible to apply under the MPRA, will meet the criteria for plan partitioning as well.

    Partitioning is most likely to help smaller plans that have reasonable prospects for remaining solvent, industry experts said.

    "I think it is going to depend on the size of the benefits. If the cuts are substantial, the plan may not need the partition," said Christian Benjaminson, principal consulting actuary with Cheiron Inc. in McLean, Va., who prepared the furniture workers' MPRA application.

    Another factor is whether participants vote to accept their fund's MPRA plan. Approval was not an issue for the United Furniture Workers fund, since 70% of participants had already-low benefits that could not be cut beyond 110% of the PBGC's minimum guarantee. The current PBGC multiemployer guarantee maximum, in place since 2001, is $15,015 per year for a worker with 35 years of service, and $8,580 for 20 years of service.

    Mr. Greenblum noted that winning approval from participants to undertake a partition "will depend on many variables, including the extent of communications efforts made by the trustees and the efforts of groups organized in opposition, including the position of the parent union," said Mr. Greenblum.

    Related Articles
    PBGC: Multiemployer insolvency still targeted for 2025
    St. Joseph Hospital pension plan goes into temporary receivership on insolvency…
    Participants approve United Furniture Workers pension benefit cuts
    Westinghouse DB plan short $937 million if terminated, PBGC says
    Corporate pension plans ramping up focus on reducing liabilities through risk t…
    More firms make move, but targets shifting
    PBGC single-employer, multiemployer deficits moving in opposite directions
    3 more multiemployer plans apply for benefit cuts
    Recommended for You
    R.I. treasurer seeks transparency laws for church plans
    R.I. treasurer seeks transparency laws for church plans
    Public pension funds adopt cost-sharing mechanisms to stem volatility
    Public pension funds adopt cost-sharing mechanisms to stem volatility
    Avery Dennison to terminate U.S. pension plan
    Avery Dennison to terminate U.S. pension plan
    The Institutional Investor's Guide to ESG Investing
    Sponsored Content: The Institutional Investor's Guide to ESG Investing

    Reader Poll

    January 25, 2023
    SEE MORE POLLS >
    Sponsored
    White Papers
    The Future of Infrastructure: Building a Better Tomorrow
    Fulcrum Issues: Equity Returns and Inflation — Choose Your Own Adventure
    What Matters Most in Considering a Private Debt Strategy
    Why pursue direct lending in the core middle market?
    Research for Institutional Money Management
    Are Factors a Thing of the Past?
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Defined Contribution East
      • 2023 ESG Investing