Two multiemployer pension funds whose applications to reduce benefits were rejected by the Treasury Department or withdrawn have submitted new ones under the process established by the Multiemployer Pension Reform Act of 2014.
Alaska Ironworkers Pension Plan, Anchorage, applied Dec. 19 to reduce benefits by 26.5% for benefits earned as of July 2016. The plan's actuary estimated that it will be unable to pay benefits by 2031 without the reductions. "The proposed reduction is not designed to get the plan back to 100% funded. The cuts are only big enough, and will only last long enough, to keep the plan from running out of money," the trustees said in a letter to participants.
At the time of the pension fund's first application submitted March 30, 2017, and later withdrawn, it had 1,573 participants and was projected to be insolvent in 15 years, with assets of $56.5 million and a 59% funding level.
Officials at the Iron Workers Local 16 Pension Fund, Towson, Md., have also reapplied under MPRA to reduce benefits starting Oct. 1. Without the reductions — an average of 20% in benefit cuts — it is projected to be insolvent by 2032. Reduced work opportunities in the Baltimore area and market losses that sent the funding level down to 64% by the end of 2008 from 91% at the beginning of the year led the trustees to make the difficult decision, they said in a letter to participants.
As of Jan. 1, 2017, the pension fund has assets of $78 million and liabilities of $121.5 million, for a funding level of 64.2%.
In a Nov. 4, 2016, rejection letter to trustees, Kenneth Feinberg, then the Treasury's special master overseeing the MPRA application process, said the proposed cuts were not reasonably estimated to allow the plan to avoid insolvency because the mortality and hours-of-service assumptions used were not reasonable. Using more refined mortality assumptions based on relevant and historical demographic data "would produce materially different results," Mr. Feinberg wrote. He also disputed the trustees' projections about future contributions.
