Local 805 of the International Brotherhood of Teamsters Pension & Retirement Fund, New York, can begin reducing benefits beginning Jan. 1, the Treasury Department said in a Nov. 16 letter to the pension fund.
Treasury officials had provisionally approved the application for benefit reductions, which became official after plan participants voted on it in late summer. Of the 1,985 participants and beneficiaries eligible to vote who received a ballot, 535 voted to reject the benefit reduction and 296 voted to approve it; 1,098 did not return a ballot.
The benefit reduction process established by the Multiemployer Pension Reform Act of 2014 states that unless a majority of eligible voters rejects the benefit reduction, it will go into effect.
Also on Nov. 16, the Pension Benefit Guaranty Corp. issued a partition order for the Local 805 plan, transferring some liabilities for orphan participants — those who worked for employers no longer contributing to the plan — to the agency. The partition application was approved, the PBGC said, because the plan demonstrated it would keep the original plan solvent with the following changes: employers will increase their contribution rate by 3% annually, employers will maintain a stable number of active participants, and investment return assumptions will start at 5.25% for plan year ending in 2018, increasing every five years until hitting 7.25% in plan year ending 2033. The partition will reduce PBGC’s expected long-term losses by $28.7 million when the partition goes into effect Jan. 1.
It was the pension fund’s second MPRA application. At the time of the original application in March 2017, Local 805 had $51.7 million in assets and 2,065 participants, and was projected to be insolvent within six years.
Of the 2,027 current participants, 498 will have no cuts due to protections for older or disabled participants; for the remaining participants, benefit cuts will average 40.8%, according to application documents.
So far, eight MPRA benefit reduction applications have been approved, and five have been denied. Another 11 are being reviewed.
The most recent application was IBEW Local 237, Niagara Falls, N.Y. The plan is 25.5% funded, with $19.2 million in assets and $25.5% in liabilities. Plan trustees said in the application that contribution rates have increased drastically during the past decade, going to the current $13.25 per hour from $3.65 per hour in 1999.
According to its application submitted Sept. 28, the plan is projected to be insolvent by 2027 without the reductions, which would go into effect starting Oct. 1, 2019. Treasury officials have until May 11 to make a decision on the application; if approved, plan participants would also have to vote on it.