Compliance May 28, 2024

PBGC Issues $54.6M SFA Package to UFCW Plan

The regional plan, based in New Jersey, has more than 4,000 participants in food service.

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The Pension Benefit Guaranty Corporation provided a $54.6 million Special Financial Assistance grant to the United Food and Commercial Workers Regional Pension Fund.

The regional fund covers 4,605 participants in the service industry and is based in Mount Laurel, New Jersey. The plan was in critical status, and as of the end of 2021, was only 33.47% funded.

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At the end of 2021, the fund had $64.4 million in assets, 733 active participants, 1079 retired participants, and 2,385 separated participants entitled to benefits in the future.

The SFA provision of the American Rescue Plan Act allows for PBGC funding for severely underfunded multiemployer pension plans. Grants are calculated to ensure plan solvency through 2051.

Pension funds that receive assistance must monitor the interest resulting from the grant money as separate from other sources of funding. The PBGC requires that at least two-thirds of the money it provides be invested in “high-quality fixed income investments.” The Final Rule on Special Financial Assistance, issued in July 2022, states that the other third can be invested in “return-seeking investments,” such as stocks and stock funds.

Compliance May 28, 2024

Senate Takes Up Plan Startup Retirement Tax Credit Legislation

The legislation mirrors another bill in the House, which increases credits for offering retirement plans for the smallest businesses.

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A bill to increase start-up tax credits for small businesses with nine of fewer employees offering retirement plans was introduced to update provisions found in the Setting Every Community Up for Retirement Enhancement Act of 2019 and the SECURE 2.0 Act of 2022.

The Retirement Investment in Small Employers Act, was introduced in the Senate by Senators Maggie Hasan, D-New Hampshire, and Ted Budd, R-North Carolina, on May 24. If passed, it would increase to $2,500 from $500 the minimum tax credit available to employers with between one and nine employees that offer a retirement plan. A bill with the same name and effect was introduced in the House in October but has not yet been brought for a vote.

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Section 102 of the SECURE 2.0 Act expanded plan startup tax credits for smaller businesses. It expanded the share of administrative costs that can be counted towards a credit to 100% from 50% for employers with 50 or fewer employees for the first three years of the plan, up to an annual maximum of $5,000.

However, SECURE 2.0 did not amend the tax credit structure found in SECURE 1.0, which limited the startup credit to $250 per employee, with a minimum of $500. By keeping the $250 per employee provision in place, but upping the minimum benefit to $2,500 regardless of the number of employees, those employers with between one and nine employees receive an added incentive to offer a retirement plan.

Section 102 of SECURE 2.0 also offers a tax credit to incentivize employer contributions to defined contribution plans. The credit, which was effective after December 31, 2022, provides a credit of 100% of employer contributions for the first two years of the plan, 75% in the third, 50% in the fourth, 25% in the fifth, and none from year six onward. The value of the credit cannot exceed $1,000 per employee and is available to employers with 100 or fewer employees, but is phased out gradually for those with 51 to 100 workers. This part of Section 102 is not modified by the RISE Act.

 

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