The Pension Benefit Guaranty Corp. reached a settlement with a Washington-area multiemployer pension fund and contributing grocery employers to delay its projected insolvency by a year, the agency said Jan. 1.
PBGC officials said in a statement that the agreement with the Food Employers Labor Relations Association and the United Food and Commercial Workers International Union involving the severely underfunded FELRA & UFCW Pension Fund was prompted by actions taken in 2013 by the union and its two primary contributing employers, Giant Food of Maryland and Safeway Inc.
In January 2013, the bargaining parties froze benefits under the FELRA & UFCW plan and created a new multiemployer plan for future benefit accruals, the Mid-Atlantic UFCW and Participating Employers Pension Plan, which diverted more than $100 million in contributions and accelerated the insolvency of the main plan, the PBGC said in a statement.
PBGC Director Gordon Hartogensis said in the statement that the 2013 arrangement "threatened to increase costs needlessly both for PBGC's Multiemployer Insurance Program — already projected to run out of money in 2026 — and participants and employers in the other 1,400 multiemployer plans that pay PBGC premiums."
The FELRA & UFCW Pension Fund had $352 million in assets and $1.7 billion in liabilities and was less than 21% funded in 2018.
Without the PBGC settlement, the plan would have become insolvent this month. The settlement calls for the Mid-Atlantic plan to combine with the FELRA & UFCW plan, which will be terminated by mass withdrawal. Plan insolvency is now expected to occur in mid-2022.
Giant and Safeway agreed to pay $56 million annually for 25 years in withdrawal liability, in exchange for being released from future liability.