The Pension Benefit Guaranty Corp. agreed to assume the liability for Big Brothers Big Sisters of Metropolitan Detroit's pension plan, according to the nonprofit's CEO.
The federal agency and the Detroit-based non-profit reached an agreement on the liability in December and are waiting to finalize it, said Jeannine Gant, president and CEO of Big Brothers Big Sisters.
Under the terms of the agreement, Big Brothers Big Sisters will pay $75,000 over five years beginning in 2021. The PBGC will assume $439,053 in pension liabilities, and the 17 former employees in the plan will receive pension payments as promised, Ms. Gant said.
Big Brothers Big Sisters was initially among participants in a pension plan that United Way for Southeastern Michigan operated between 2005 and 2009. In 2012, the PBGC agreed to take control of the United Way's plan, but Big Brothers Big Sisters had already left the plan in 2007. Some non-profits that left have continued to deal with the fallout of that plan being insufficiently funded.
The pension obligation has been a financial burden on the non-profit's operations for over a decade, Ms. Gant said. Big Brothers Big Sisters, which operates on an annual budget of $1.4 million, on average, was paying $100,000 each year in pension contributions.
"Combined with downturns in other historical funding sources for Big Brothers Big Sisters, these past few years have been very challenging financially and limited our opportunity to serve more vulnerable youth in our community," she said.
The money paid to the pension liability could have funded mentoring for another 100 kids, Ms. Gant said. And with no buildings or property to sell and a break-even operating budget, there was no other option than to file for the distress termination with the PBGC, she said.
"This decision helps clear a pathway towards great financial stability for our organization."
It will enable the nonprofit to serve, on average, another 100 kids each year and make the nonprofit more attractive to potential partners and funders, Ms. Gant said.
This story was published by Crain's Detroit Business, a sister publication to Pensions & Investments.