The Pension Benefit Guaranty Corporation (PBGC) has approved a partition application and will provide early financial assistance to the United Furniture Workers Pension Fund A, a Nashville-based multiemployer pension plan that covers nearly 10,000 participants.
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In a press release, PBGC said the early financial assistance, together with benefit reductions that are required as a condition for receiving PBGC assistance, will help the plan avoid insolvency and pay benefits to participants.
The U.S. Department of the Treasury approved a related application submitted by the plan for the required benefit reductions and certified the results of a participant vote on the plan’s benefit reduction proposal. PBGC’s approval of the partition and early financial assistance is the first under the Multiemployer Pension Reform Act of 2014 (MPRA), which rewrote the rules for partition.
Under MPRA, troubled multiemployer pension plans that face insolvency are permitted to apply for benefit reductions and, if necessary, early financial assistance from PBGC to extend their financial viability.
In its applications to the Treasury and PBGC, the plan trustees said that the fund was in critical and declining status, that the plan’s assets and future income are insufficient to pay promised benefits, and that the plan would run out of money in 2021.
Under the partition, PBGC provides early financial assistance by moving a portion of the plan’s guaranteed benefit obligations to a new, separate plan that will have its costs reimbursed by PBGC. This will relieve some of the financial burden on the United Furniture Workers Fund and enable it to avoid insolvency. Plan participants whose benefits are moved to the new plan will be treated the same as participants whose benefits remain entirely in the original plan.
Under the law, benefits of 7,100 participants will not be reduced, because the participants are aged or disabled or have benefits that are not more than 10% greater than PBGC guarantees would provide. The remaining 2,800 participants will see future benefit reductions to 110% of the PBGC guaranteed amount, averaging a 12.7% cut in benefits.