Compliance July 17, 2023

Manufacturing, Transportation, Retail Pension Funds Receive PBGC Bailouts

Special Financial Assistance funds were granted to three struggling pension plans by the PBGC on July 11.

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The Pension Benefit Guaranty Corporation granted Special Financial Assistance packages to three struggling multiemployer pension funds on July 11, including more than $1 billion dollars to a single fund.

The Automotive Industries Plan, based in Dublin, California, received $1.1 billion in assistance. The plan has 23,687 participants and was expected to become insolvent in 2033. Upon insolvency, it would have had to cut benefits by about 50%.

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The 5500 Form for the Automotive Industries Plan showed it had 3,024 active participants at the end of 2021. It also had 9,305 participants receiving benefits and 9,011 inactive participants entitled to benefits in the future.

The Western Pennsylvania Teamsters and Employers Pension Plan received $279.5 million in supplemental assistance on top of the $715 million it received in July 2022. The Pittsburgh-based plan has 21,110 participants and became insolvent in August 2019, when it implemented a 20% benefit cut to about 15,000 participants.

According to the Western Pennsylvania Teamsters and Employers’ Form 5500, the plan had 3,799 active participants at the end of 2021, as well as 8,528 participants receiving benefits and 5,437 separated participants entitled to future benefits.

Lastly, the Retail Clerks Specialty Stores Pension Plan, based in Concord, California, received $60.4 million in assistance. The plan has 1,274 participants and was expected to become insolvent in 2024, when it would have had to cut benefits by 15%.

Form 5500 for this plan showed it had 32 active participants at the end of 2021, as well as 849 participants receiving benefits and 331 separated participants entitled to future benefits.

The SFA provision of the American Rescue Plan Act allows for PBGC funding for severely underfunded multiemployer pension plans. 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.

Administration July 17, 2023

DOL Seeks Independent Fiduciary for 401(k) Plan of Closed NY Construction Company

When L D Wenger Construction Co. Inc. ceased operations, its 401(k) plan was deserted by the fiduciary, barring retirement plan participants from access to their retirement assets, the Department of Labor alleges.   

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DOL Seeks Independent Fiduciary for 401(k) Plan of Closed NY Construction Company

A New York building contractor abandoned the 401(k) retirement plan for employees—comprising $597,325 of retirement assets for seven participants, as of the most recent data available—after the business was closed in 2017, the Department of Labor alleged in a complaint filed July 11 in U.S. District Court for the Eastern District of New York.

The DOL, in the name of Acting Secretary of Labor Julie Su, alleged three counts of fiduciary breach under the Employee Retirement Security Act against defendants L.D. Wenger Construction Co. Inc. 401(k) Plan and plan administrator and fiduciary David Wenger, the complaint shows.

The plan was not terminated, and no individual or entity has assumed fiduciary responsibility for the plan or to distribute the plan’s assets to its participants after the Plainview, New York-based business ceased operations, the complaint shows.

“Wenger has failed to wind down the plan,” the complaint states. “As such, no assets can be distributed to participants without a duly appointed fiduciary.”

The lawsuit requests the court order Wenger’s removal as fiduciary and appointment of independent fiduciary to distribute the plan assets and terminate the plan, the complaint shows. The lawsuit is Julie A. Su v. L D Wenger Construction Co Inc. 401(k) plan and David Wenger. 

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“Without a duly appointed trustee or other fiduciary of the Plan to instruct an asset custodian to distribute the Plan’s assets, the Plan’s participants are unable to obtain distributions of funds from the Plan,” the complaint says.

The plan was established at some time “prior to 2010” to provide retirement benefits to the company’s employees, the DOL complaint shows. Wenger signed the plan’s annual Form 5500s filed with the DOL between 2010 and 2016.

The DOL also requested a court judgment ordering that any expenses associated with the appointment of the independent fiduciary and subsequent administration and termination of the plan be charged to Wenger and ordering such further relief as is appropriate and just.

The defendants did not comment on the litigation.

This is the third complaint filed by the DOL in 2023 against plan sponsors that abandoned responsibility for their plan when the company went out of business, following cases in Michigan and Arizona.

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