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.

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