PBGC Approves Pension Plan Merger
The Pension Benefit Guaranty Corporation (PBGC) announced in January that it has approved a facilitated merger of two multiemployer pension plans, the Laborers International Union of North America 1000 Pension Fund and the Laborers Local 235 Pension Fund. This is the first approved merger under the Multiemployer Pension Reform Act (MPRA).
Under MPRA, the PBGC can facilitate mergers in certain scenarios, including when a plan is projected to be insolvent within 20 years. In this case, the Local 1000 Plan—which covers 400 participants—is projected to run out of money in 2026. Its merger with the Local 235 Plan, which is fully funded, will protect the retirement of the Local 1000 Plan participant but is not expected to negatively affect the participants of the Local 235 Plan.
MPRA allows the PBGC to provide financial assistance to merging plans. In this case, the PBGC will provide three annual installments of $8.9 million to the newly merged plan. Because the Local 1000 Plan will no longer be in danger of failing and thus relying on the PBGC insurance program to pay retiree benefits, the PBGC has determined that the merger will reduce the PBGC’s overall loss, despite the financial assistance provided.