The Treasury Department has received two more applications to reduce benefits under the Multiemployer Pension Reform Act, including a second try from the Carpenters Pension Trust Fund in Detroit.
The Arizona Bricklayers' Pension Trust Fund, Phoenix, applied to reduce benefits to avoid insolvency and to have the Pension Benefit Guaranty Corp. partition the plan. According to the application submitted Sept. 30, the pension fund was 92.2% funded as of January with $29.2 million in assets, but is now projected to be insolvent by 2035.
Since 2007, two-thirds of contributing employers left the plan, including two large employers that are no longer union signatories. The number of active participants fell 91% to 54 from 579, the application said.
The proposed reductions would reduce benefits to 110% of the PBGC guarantee, except for older or disabled participants. The average proposed reduction is 12.3%, with 459 participants seeing their benefits reduced to 110% of the PBGC guarantee benefit and 51 participants seeing a partial reduction.
Partitioning sets up a second plan to pay some benefits that the PBGC guarantees and is granted only if the changes will make a pension fund solvent.
Treasury officials have until May 13, 2021, to decide. If approved, the benefit reductions would start Jan. 1, 2022.
In their second MPRA application, trustees of the Carpenters Pension Trust Fund–Detroit & Vicinity said the plan would be insolvent by 2032 without the reductions. The original application was withdrawn in April. The pension fund, part of the Michigan Regional Council of Carpenters and Millwrights, was 33.4% funded, according to its 2020 actuarial certification, with assets of $718.5 million as of April 30.
According to the current application, the plan's funded status "declined precipitously" from 117% in 2000 to 66% in 2003. Along with negative market returns, the trustees cited labor market changes and an aging participant population.
The application calls for several benefit reduction categories, with a 32% cut on pre-2007 accruals and then variations. It is projected to become insolvent during the plan year ending April 30, 2032 if the suspension plan is not approved.