Compliance November 3, 2023

Bakery Drivers Plan Loses Case in $132M SFA Application

The plan applied for special financial assistance but was denied because the pension fund had previously been terminated.

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A federal court upheld the Pension Benefit Guaranty Corporation’s decision to deny a multiemployer plan’s application for special financial assistance.

The PBGC had denied the application because the Bakery Drivers Local 550 and Industry Pension Fund had terminated by mass withdrawal in 2016, then attempted to restore itself in 2022 with the intent to apply for an SFA grant. Local 550 challenged the PBGC’s decision in March in the U.S. District Court for the Eastern District of New York. The court ruled against the pension fund on October 26 in Board of Trustees of the Bakery Drivers Local 550 and Industry Pension Fund v. PBGC.

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In 2011, approximately 60% of Local 550’s contributions came from Hostess Brands Inc., which declared bankruptcy in 2012 and was not required to pay withdrawal liability to the plan. In 2016, the remaining largest employers in the multiemployer plan transferred liability to the International Brotherhood of Teamsters and terminated the plan by mass withdrawal. The pension fund’s complaint noted that the PBGC approved this transaction and that it was done in the best interests of the plan.

According to the plan’s Form 5500 from 2016, the last year of its existence, it had 122 active participants at the beginning of 2016 and 0 at year’s end. It had 711 retired participants, 303 participants entitled to benefits in the future and 246 deceased participants with beneficiaries receiving benefits. The plan was 21.84% funded at the end of that year.

The Floral Park, New York-based plan argued that it restored itself in September 2022 and met the criteria for a grant under the Special Financial Assistance program. Specifically, according to the PBGC’s final rule, a plan in critical and declining status in plan years 2020, 2021 or 2022 is eligible for a grant, in addition to other criteria. Since Local 550 was in critical and declining status in 2022, the year it was reconstituted, it asserted that denying the plan’s application was unlawful.

When the plan restored itself in 2022, it anticipated its insolvency by August 2023. The plan applied for a $132 million grant in January 2023. The PBGC denied the application because plans terminated by mass withdrawal are ineligible for a grant, and there is no process for self-restoration under the Employee Retirement Income Security Act. Only the PBGC can restore a multiemployer plan.

The district court ruled that a terminated plan cannot have status under the PBGC’s system for rating plan solvency and therefore cannot claim to have been in critical and declining status for the purposes of applying for an SFA grant. Further, ERISA does not permit plans to unilaterally restore themselves. Therefore, the PBGC acted reasonably within the statute in denying the application, according to the court decision.

John Lowell, a partner with October Three, explains that, “While the statute makes provision for PBGC to restore a plan that has been terminated via mass withdrawal, the statute neither specifically allows nor precludes a fund from doing that itself. The court found that PBGC was acting within the powers afforded it by Congress in saying that the fund in question could not restore itself and thereby make itself eligible for the taxpayer-funded Special Financial Assistance.”

Lowell adds that this is unlikely to be a recurrent problem, because this is “an unusual case in which the fund tried to avail itself of a novel legal theory. I do not see where this will have any effect on other pending or future applications for SFA money of which I am aware.”

Attorneys for the plan did not respond to a request for comment about whether they intend to appeal the court’s decision.

Data and Research November 3, 2023

Employers Largely Underestimate Employees’ Caregiving Responsibilities

While working caregivers tend to have little in emergency savings and often retire early, employers’ benefit offerings are misaligned with what caregivers want and need, new TIAA research shows.

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More than 53 million Americans, or about one out of every five adults, currently provide uncompensated care to their spouses, partners, parents or children living with serious health problems or disabilities.

As about 60% of these caregivers are employed outside the home, the TIAA Institute argued in its recent report that caregiving is an important workplace issue that most employers underestimate.

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According to the study, more than 90% of caregivers are also financial caregivers—defined as either contributing direct financial support or coordinating some or all of their loved one’s money-related matters. As a result, many caregivers leave the labor force or retire earlier to devote sufficient time to caregiving duties.

Specifically, family caregivers have an average of about $7,200 per year in out-of-pocket expenses and spend even more for family members with serious conditions like Alzheimer’s disease.

Caregivers are also more likely to have lower levels of financial assets and more likely to have problem with debt than non-caregivers. Additionally, 25% of caregivers report having less than $1,000 in savings and investments, compared with 15% of non-caregivers.

Misaligned Benefits

The impact on employers is also substantial. A recent study conducted by researchers for the Value in Health Journal estimated that productivity losses amount to $5,600 per employee per year.

“Nevertheless, most employers do not measure the extent of caregiving responsibilities in their work force, and greatly underestimate the direct and indirect business costs of their employees’ caregiving,” the TIAA report stated. “Studies of employers and employees suggest that the benefits employers provide are not well aligned with what caregivers say they want and need.”

For example, while 51% of employers surveyed in the TIAA report offer flexible scheduling, 76% of employed caregivers said they would use a flexible scheduling benefit if it was offered to them. In addition, 74% said they would take advantage of paid family medical leave if offered, and 66% would take advantage of remote work or telework.

TIAA also pointed out that family caregiving is not only a concern for middle-aged and older adults. Millennials—now in their 20s and 30s—make up one-quarter of all caregivers.

Because life expectancy in the U.S. has increased by 17 years since 1935, this “longevity bonus” has implications for retirement readiness, as anyone’s time as a caregiver might be much longer than in the past, highlighting the need to plan for longer lengths of retirement and caregiving through different life stages.

How Employers Can Help

Given the significant impact of caregiving on employee performance retention, employers have an opportunity to lead efforts to support working caregivers and alleviate their financial stress.

TIAA recommended that employers evaluate the prevalence and extent of caregiving among their employees. One instrument to potentially use is the Caregiving Intensity Index, developed by the startup Archangels. The index is a two-minute self-assessment that measures how caregiving is affecting someone’s well-being and how they are coping with stressors such as money and family disagreements.

This application has been implemented in workplaces in New York and Massachusetts through “Any Care Counts” campaigns, according to TIAA.

Surya Kolluri, head of the TIAA Institute, said in an emailed response that the number of caregivers in a given organization is “always going to be in flux.”

“Each day, about 10,000 Baby Boomers turn 65, and they’re living longer than ever.” Kolluri said. “So just because an employee isn’t a caregiver today doesn’t mean they won’t be tomorrow.”

He added that seeing how many people use caregiving benefits and attend resource group meetings can help employers have a better understanding of their workforce, and he argued for providing these resources to build employee loyalty.

Employers ought to also review their current benefits offerings and how well they address challenges to caregivers’ financial well-being, TIAA argued. Based on this assessment, employers can consider additional benefits that match caregivers’ needs, such as flextime, paid family leave, geriatric management services and emergency backup care.

In terms of retirement planning, employers should provide “early and continual access” to retirement planning services that incorporate awareness of the impact of longevity for individual employees and the effects of financial caregiving at different life stages. Providing access to financial apps or access to financial or legal advisers can also be beneficial.

“Employers need to offer services that help people understand how to craft short- and long-term budgets,” Kolluri said. “Provide access to financial advisers or other resources that help employees see, for example, how they can afford to buy a home, start a family and send kids to college while also saving for retirement and planning for the possibility of time off and extra expenses related to caregiving.”

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