The Pension Benefit Guaranty Corp. restructured a multiemployer pension plan and took over benefit payments for former Hostess Brands Inc. participants, allowing the Bakery and Sales Drivers Local 33 Industry Pension Fund in Baltimore to remain solvent, the agency announced Friday.
By exercising its authority to partition certain members of a multiemployer fund, the PBGC helped the fund merge with another solvent plan, the Milk Drivers and Dairy Employees Local Union 246 of Washington D.C. Pension Fund, in Landover, Md. Both pension funds cover members of the International Brotherhood of Teamsters.
Hostess Brands, Irving, Texas, liquidated in 2012 but suspended payments to its 42 multiemployer plans in 2011. In 2011, the Local 246 fund had $67 million in assets and was fully funded. PBGC officials said the Local 33 fund, which fell to 50% funding with the Hostess participants, is now fully funded as well.
PBGC officials said they used the restructuring tactic of partitioning for the third time in the agency’s history. In 2010, partition was granted for the Chicago Truck Drivers, Helpers & Warehouse Workers Union (Independent) Pension Fund after 52 contributing employers went bankrupt or out of business. Setting those employees up in a separate plan with benefits paid by the PBGC allowed 57 employers’ workers and retirees to continue to receive full benefits, and the plan remains solvent.
Brad Raymond, Teamsters general counsel, said in a statement that while the Hostess participants will have their benefits cut to the PBGC maximum level, an average drop to $520 from $650 per month, “at least these benefits will now be guaranteed, and PBGC’s actions will ensure that the fund will not run out of money.”
Another multiemployer pension fund with Hostess participants has already applied for partition relief, and more are expected, said Sanford Rich, PBGC chief of negotiations and restructuring, in an interview.
Hazel Bradford writes for Pensions & Investments, a sister publication of Business Insurance.