New York State Teamsters Conference Pension and Retirement Fund, Syracuse, will implement a benefit reduction plan on Oct. 1, following a participant vote posted on the Treasury Department website Wednesday.
The pension fund is the third multiemployer fund to receive approval for benefit reductions under the Kline-Miller Multiemployer Pension Reform Act of 2014, and the largest to date. As of Jan. 1, the plan was 37.8% funded, with $1.28 billion in assets and $3.39 billion in liabilities.
While 9,788 participants voted against the plan and only 4,081 voted for it, another 20,767 did not vote, leaving only 28.26% of the total vote opposed. The law requires 50% to stop it.
The act requires participants to vote on the proposed plan, but also gives federal regulators the authority to override a negative vote for plans with more than $1 billion in liabilities that would impact the Pension Benefit Guaranty Corp. The agency's multiemployer program is itself projected to be insolvent by 2025.
The plan calls for the pension fund to implement benefit reductions, known as suspensions, of 29% for retirees and 19% for active participants, who have already had their future accruals reduced under the fund's rehabilitation plan. Nearly 28% of plan participants will see no cuts due to protections for elderly and disabled participants.
"It's difficult for the trustees to do this, but it's even harder if they can't do this," said the fund's attorney, John F. Ring with Morgan Lewis. Without the benefit reductions, the plan was projected to be insolvent in less than 10 years.
A further complication was the PBGC's own pending insolvency, which would have jeopardized benefit payments to participants in all plans assisted by the agency.
"To file an application like this, especially one of the first in the face of a number of rejections, it was difficult for trustees to take this courageous action," Mr. Ring said, adding that it was taken "to avoid the possibility of pensioners getting absolutely nothing further on down the road … We are at least in a position where we can take action to stay solvent."