Two laborers union local multiemployer pension funds will join forces under a Pension Benefit Guaranty Corp.-facilitated merger announced Tuesday.
It is the first time that the PBGC is exercising its authority under the Multiemployer Pension Reform Act of 2014 to provide financial assistance to help merge two multiemployer plans when it can extend the solvency of a financially distressed plan that would otherwise be insolvent within 20 years. It must also not impair the PBGC's ability to meet its existing financial assistance obligations to other multiemployer plans.
Laborers International Union of North America 1000 Pension Fund in Poughkeepsie, N.Y., covers 400 participants and is projected to be insolvent by 2026. Laborers Local 235 Pension Fund in Elmsford, N.Y., with $45 million in assets at the end of 2018, covers 1,100 participants and is in the healthy “green zone” plan status.
Both plans were organized by two neighboring LIUNA local unions that merged in 2014, with all new union members participating in the Local 235 Plan. Trustees of both plans arranged the merger and requested the PBGC assistance.
The PBGC will provide the Local 235 plan $8.9 million a year for the next three years, beginning this month.
PBGC Director Gordon Hartogensis said in a statement that by providing support, "we are preventing a failing plan from going broke and preserving benefits in a financially responsible way."
In a Dec. 20 letter to Local 235 Pension Fund officials, PBGC Chief of Negotiations and Restructuring Karen Morris said the PBGC "reasonably expects that the provision of such financial assistance is necessary for the Local 235 Plan to remain solvent following the merger," and that it is also expected to reduce the PBGC's expected long-term loss related to the Local 1000 Plan.
The merger does not involve benefit cuts known as suspensions. While MPRA is typically used by struggling plans seeking to reduce benefits to remain solvent, an application for benefit reductions is not required for a facilitated merger.
Calls to Local 235 officials were not immediately returned.