Multiemployer pension plans that received too much federal aid based on inaccuracies in plan census data must return the excess funds, but the Department of Labor will not take any enforcement action against a plan for doing so, according to new department guidance.
“While these excess payment amounts may represent only a small fraction of total (special financial assistance) payments, they would not otherwise have been paid and, as such, must be refunded to the United States government,” the Labor Department said in guidance posted March 14 on its website. “The plans do not have a valid claim to the funds, which never should have been paid and would not otherwise have been.”
The issue centers around the Pension Benefit Guaranty Corp.’s Special Financial Assistance Program, which was created by the American Rescue Plan Act that Democrats passed in March 2021 and is designed to help struggling multiemployer pension plans. To date, the program has doled out more than $53 billion to plans that cover about 775,000 workers, retirees and beneficiaries.
In December 2022, the PBGC awarded the Teamsters Central States, Southeast & Southwest Areas Pension Fund, Chicago, $36 billion in SFA funds, by far the largest award in the program's history.
But in November, a report from the Office of Inspector General for the PBGC found that in reviewing Central States' SFA application, the agency required the pension fund to provide only a list of all plan participants and proof of a search for deceased participants, known as a death audit. The PBGC did not cross-check the information against the Social Security Administration's full Death Master File, which is the source recommended by the U.S. Government Accountability Office for reducing improper payments to deceased people, according to the report.
The PBGC OIG found 3,479 deceased participants in Central States SFA application, so when the amount of aid the plan would receive was calculated, it was inflated by about $127 million.
The PBGC in November issued a statement that said following a June white paper from the OIG, the agency promptly revised the application review process to require an independent death audit for all pending and prospective SFA applications.
The Labor Department guidance was in response to a letter sent Feb. 28 by Thomas C. Nyhan, executive director of the Central States Pension Fund, in which he expressed concern that his fund could run afoul of ERISA if it returned the excess SFA money.
The department said ERISA does not prevent plans from refunding any excess payments received through the SFA program, or excuse any failures to return SFA funds to which the plans are not entitled.
“These excess payments can and must be repaid, and in the department’s view, such repayments would not violate the ERISA provisions noted” earlier in the guidance, the department wrote. “The department has confirmed its understanding with the Department of the Treasury and the Internal Revenue Service.”
In an interview with Pensions & Investments earlier in the week, Ali Khawar, principal deputy assistant secretary of the Labor Department's Employee Benefits Security Administration, said plans like Central States that received excess SFA funds did nothing wrong and relied on the best data available. In its guidance, the department noted that plans do not have access to the Social Security Administration’s Full Death Master File.
Rep. Virginia Foxx, R-N.C., chair of the House Education & the Workforce Committee, who has pressed the PBGC to recoup the excess funds, said in a statement that “it's about time DOL acted in the best interest of hardworking taxpayers.” She later added, “Americans deserve and demand unfettered accountability and effective oversight — anything less will not suffice.”
A spokesperson for Central States did not immediately respond to a request for comment.
