The Detroit Carpenters’ Pension Trust Fund applied to the Treasury Department to reduce pension benefits in order to remain solvent.
The application under the Kline-Miller Multiemployer Pension Reform Act of 2014 was submitted Sept. 20 and is posted on the Treasury Department's website.
The $772 million pension fund, part of the Michigan Regional Council of Carpenters and Millwrights, was 34.8% funded as of May 1, 2018 and projected to run out of money by 2034 unless the benefit reductions known as suspensions are approved.
The application calls for the reductions to begin in July. An actuarial projection shows that as of May 1, there will be $779.6 million in assets and $1.97 billion in liabilities, for a funding level of 39.5%, which would increase to 44.8% by 2065 under the suspension plan.
The plan calls for pension benefits earned before 2007 to be reduced as much as 16% depending on years of service, with no cuts for elderly or disabled participants. Benefits earned after 2007 already are calculated under lower accrual rates and would not change under the plan. Deferred vested participants would see a 26% benefit reduction. If the application is not approved, participants would be subject to guarantee levels of the Pension Benefit Guaranty Corp. that are at least 95% lower than current levels.
A year ago October, pension trustees voted in anticipation of the MPRA filing to temporarily waive a restriction on working so that participants retired for at least 18 months could work without losing their pension benefits. The trustees noted in a letter to participants at the time that “there are a number of pension plans around the country that have become stable” through the MPRA benefit suspension program.
The application is open for a 225-day comment period and then will be subject to a vote by participants.
According to the Treasury website, 14 suspension plans have been approved and five denied since the MPRA began in 2016. Another three, not counting the Detroit Carpenters' Pension Trust Fund, are being reviewed.