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The Teamsters Central States Pension Fund says it will now turn to federal lawmakers for help to prevent the collapse of the massively underfunded multiemployer pension plan.
“In the coming months, we will do everything in our power to support a legislative solution that protects the pension benefits of the more than 400,000 Central States participants and beneficiaries,” Thomas Nyhan, executive director of the Central States, Southeast and Southwest Areas Pension Fund said in a statement Thursday.
“At this time, only government funding, either directly to our pension fund or through the PBGC, will prevent Central States' participants from losing their benefits entirely,” Mr. Nyhan added, referring to the Pension Benefit Guaranty Corp. The federal agency partially guarantees participants benefits,' but its multiemployer pension insurance program is projected to go bust in about a decade.
The Central States' decision to seek financial help from lawmakers follows a decision earlier this month by the U.S. Treasury Department to reject the plan's proposal to cut benefits — in some cases by 70% — for about 270,000 of the plan's more than 400,000 participants. At year-end 2014 — the last year information is available — the plan was hugely underfunded with $35 billion in liabilities and $17.8 billion in assets. Benefits cuts are allowed under a 2014 federal law, but only if the Treasury Department approves the proposal.
In his rejection letter, Kenneth Feinberg, special master for the Treasury's implementation of the 2014 law, said the Central States' plan failed because it used an investment return assumption that was too optimistic and failed to show that the proposed cuts would indeed prevent the plan from becoming insolvent in the future.
Additionally, the plan's proposed cuts were not “equitably distributed” among the retiree population, and the notice provided to plan participants about the cuts was too “technical” and “overly complex,” Mr. Feinberg said during a conference call with media outlets following the Treasury Department's rejection of the Teamsters proposal.
Mr. Nyhan, though, said in his statement that that the “alleged defects” in the plan's application “could have been identified and corrected much earlier in the process if the Treasury Department” had, among other things, been faster in pointing them out.
It isn't known how much congressional interest there is in bailing out the Teamsters' plan. Earlier, though, Reps. John Kline, R-Minn., the chairman of the House Education and Workforce Committee, and Robert Scott, D-Va., the panel's ranking minority member, called on the Teamsters plan to develop a “responsible solution” to prevent participants from losing their benefits.
The two House lawmakers said that Congress will continue its efforts to strengthen multiemployer plans.
Several other much smaller multiemployer pension plans have also filed applications with the Treasury Department to cut benefits, but those applications remain pending.
A pending plan to cut benefits to members as part of a rescue plan for the Teamsters Central States, Southeast & Southwest Areas Pension Fund, Rosemont, Illinois, is facing challenges even before the U.S. Treasury Department acts on the fund's application.