American Rescue Plan Act of 2021 ("ARPA")
The Board of Trustees provides this update on the Pension Fund’s ongoing and diligent activities relating to the Special Financial Assistance (“SFA”) program included in the American Rescue Plan Act of 2021 (“ARPA”), and to end rumor and speculation. Open or download the link seen here, Progress Report, for a summary of actions taken by this Pension Fund through mid-September 2021.
In reviewing this material, please keep in mind that while ARPA holds out the prospect of enabling the Fund to restore those benefits suspended under the August 2019 MPRA amendment, this Fund is not permitted to apply for Special Financial Assistance until after January 1, 2022. The Pension Benefit Guaranty Corporation (“PBGC”) sets the rules for determining how much money a plan can receive and is the federal agency responsible for ruling on applications. PBGC is required to approve or reject a plan’s application within 120 days of submission. Even if an application is approved, plans do not get the money until sometime after the approval. However, since this is a new law and a new function for PBGC, there is no precedent and no certainty as whether an application requesting the dollars needed to ensure long-term solvency would be approved.
The Board of Trustees began analyzing ARPA in mid-March 2021. Much was not understood until July 12, 2021, when PBGC published the rules laying out how much money plans could apply for. These rules were published on an “Interim” basis and PBGC has not indicated when the final rules will be released. The Pension Fund, as well as 102 other parties, submitted Comments to PBGC identifying several significant open questions requiring clarification. Until these open questions are answered, our actuary cannot calculate whether the amount available is enough to ensure long-term solvency and until that time, the Board of Trustees will not have all the facts and numbers needed for deliberation.
The Trustees are keenly aware that all participants have a reasonable expectation that the benefits promised will be paid and that many participants have planned their future in reliance on those expectations. The global economic collapse of 2008 confronted the Trustees with the grim reality that the Fund was projected to go insolvent in 2027 and that the Pension Fund would not be able to fully honor participants’ expectations after that date. The only option the government offered prior to ARPA was the MPRA benefit suspension tool. MPRA enabled the Pension Fund to reduce its overall benefit obligations by just enough to avoid the projected insolvency while providing a path by which all participants could reasonably expect receipt of remaining benefits for the indefinite future.
ARPA gives the Pension Fund a different option which could replace MPRA. The Board of Trustees will be required to carefully evaluate this option because it comes with conditions. After uncertainty over the facts and dollar amounts are clarified, the Trustees will need to balance the interests and expectations of current retirees and soon-to-be retirees with the interests and expectations of younger participants. The Pension Fund’s actuary has been testing alternative cash flow projections running out 30 or more years, using various assumptions regarding future financial resources and benefit obligations. The Board of Trustees needs to have accurate actuarial projections and investment forecasts before it deliberates on the hard decisions facing them.
Please understand that at this time the Pension Fund cannot provide answers to all the questions you need answered. The Trustees have a fiduciary duty to take actions in the best interests of all retirees, survivors, and participants, but only after all the facts and numbers are known.
We hope and expect that PBGC will promptly answer the open questions in the upcoming Final Rule or during the informal conferences we have scheduled with PBGC staff. Remember that even after SFA applications are filed, the answers are not known until PBGC accepts or denies the applications within 120-days after submission.
The Pension Fund will post updates concerning ARPA on this Website whenever new information becomes available.
BOARD OF TRUSTEES OF THE WESTERN PENNSYLVANIA
TEAMSTERS AND EMPLOYERS PENSION FUND
Last Updated September 21, 2021
SUMMARY OF MATERIAL MODIFICATIONS
Effective August 1, 2019
On June 20, 2019, the U.S. Treasury Department (“Treasury”) announced the Participant vote results and granted a Final Authorization to implement the benefit reductions which the Pension Fund proposed last year.
All who were involved in the development of the program to restore the long term survival of the Pension Fund have been aware of the hardships a benefit reduction can cause; however, without this reduction, the Pension Fund was projected to run out of money in 2028. The benefit reductions described below will enable the Pension Fund to survive into the foreseeable future. We urge everyone to continue with their efforts to convince federal officials to enact a better solution which would enable the Pension Fund to restore benefits.
This notice sets forth important information concerning the amended terms of the Pension Plan which will reduce benefits earned up to December 31, 2017. For Participants presently receiving retirement benefits, the reduced benefit amounts will start with the August, 2019 benefit payment. For all other participants and beneficiaries not presently receiving pension benefits, the portion of your benefit earned through December 31, 2017 will be reduced at the time your benefit commences.
The benefit reductions will be implemented on August 1, 2019 and, in general, amount to a 30% reduction of the highest benefit determined under either the unit multiplier provisions or one of the special benefit levels, if applicable. In some cases, benefits accrued through December 31, 2017 are not reduced, or reduced to a lesser extent due to one or more of the floor level protections listed below:
- Participants (and certain Beneficiaries) who are age 80 or older as of August 31, 2019 are not reduced;
- The reduction for Participants (and certain Beneficiaries) aged 75 to 80 years are reduced less than 30% based on the age attained as of August 31, 2019;
- The 30% reduction for a Participant does not apply to the amount awarded under the Disability Benefit (as defined by the Plan) prior to February 1, 2011;
- No benefit is reduced to less than 110% of the amount PBGC would guarantee if the Pension Fund ran out of money; and,
- For Active Participants in covered service as of January 1, 2018 and whose employer participated in the Pension Fund at the “Top-Tier” contribution level, their benefit after taking into consideration the 30% reduction for the portion earned up to December 31, 2017 shall not be less than the amount the Participant accrued under the Pension Fund’s $3,500 Monthly 30-And-Out Benefit level in accordance with Section 4.11(f) of the Plan. The “Top Tier” is defined as employers that were (a) contributing $225 or more per week as of December 31, 2008, and (b) who have agreed to increase their contributions under the Preferred Schedule of the Pension Fund’s Rehabilitation Plan.
Changes to the Suspension of Benefits Provisions
Prior to August 1, 2019, the Suspension of Benefits provisions of the Plan provides that retirement benefits are suspended, and post normal retirement increases do not accrue, for any month prior to a Participant attaining age 70 ½ in which a Participant works, or is compensated for, 50 or more hours in Suspendible Employment.
The number of hours a Participant can work or be compensated for in Suspendible Employment on and after August 1, 2019 is increased from 50 hours to 100 hours.
THE PENSION FUND’S RESCUE PLAN HAS BEEN APPROVED
In September, 2018, the Trustees of the Western Pennsylvania Teamsters and Employers Pension Fund reached the difficult decision to apply to the U.S. Department of Treasury (“Treasury”) for approval of a benefit reduction rescue plan. After years of study, the Trustees came to the conclusion that it was in the best interest of all participants that benefits accrued through December 31, 2017 (including benefits currently in pay status) be equitably reduced so that the Pension Fund would not run out of money in the next 10 years.
The rescue plan was approved by Treasury on May 7, 2019 under the strict rules of the Multiemployer Pension Reform Act of 2014 (MPRA), a copy of the letter can be viewed here. We think you will agree that we are now one step closer to preserving the long term solvency of the Pension Fund. The Treasury Department has agreed that this rescue plan will enable active participants to continue earning benefits, as well as adding credibility to the Pension Fund’s assurance that it will be able to pay lifetime retirement benefits.
The national pension crisis which impacted the Pension Fund, as well as many other plans, presented the Trustees with three alternatives – (1) do nothing and let the Fund run out of money in 2028; (2) wait for Congress to provide financial assistance; or, (3) equitably reduce benefits to the minimum extent needed to enable the Pension Fund to attain long term solvency. No one wants to see pension benefits reduced, but realistically, there is no responsible alternative at this time. Perhaps if lawmakers enact some other solution, we could restore benefits, but unless and until new laws are enacted, this rescue plan needs to be implemented. Nevertheless, we continue to urge lawmakers to continue working on one of the several pending bills which may provide a better way of restoring pension solvency.
Treasury's approval of our application confirms that the rescue plan is based on realistic assumptions. The Treasury Department took the full 225 day allotted period to test the Pension Fund’s conservative investment earnings, contribution income and benefit payment assumption. Their conclusion was that the proposed benefit reductions would eventually bring the Pension Fund’s cash flow into balance and enable it to avoid the unthinkable catastrophic impact of plan insolvency.
The Pension Benefit Guaranty Corporation (PBGC) provides a maximum $35.75 monthly guarantee for each year of service if the Pension Fund goes insolvent; however, PBGC has projected that it will go insolvent in 2025 unless Congress backs that guarantee.
Approval of the proposed benefit reduction rescue plan by Treasury is the first step in the process. Sometime before June 6th, the Treasury Department will mail ballot materials and conduct a vote of all participants. Although there are those that may oppose the application, the Trustees believe that our participants understand the message that a no vote could mean no pension at all in the future. We are confident that voters will do the right thing and vote in favor of the Application.
By early June, eligible voters will have received a statement of how the proposed reduction, if implemented, will impact benefits as of August 1, 2019. For participants who have not yet commenced early or normal retirement benefits, these statements are estimates which show an August 1, 2019 snap shot of the impact of the reductions, but do not reflect factors such as additional service accruals, reciprocal benefits, qualified domestic relations orders, and pop-ups.