PBGC Approves Two Special Financial Assistance Applications
In December, the Pension Benefit Guaranty Corporation (PBGC) announced that it approved the Special Financial Assistance Applications for two plans, the Local 138 Pension Plan in Baldwin, New York, and the Idaho Signatory Employers-Laborers Pension Plan in Portland, Oregon. This marks the first two approvals under the Special Financial Assistance Program.
The Special Financial Assistance Program was created by the American Rescue Plan Act of 2021. The program provides that multiemployer plans that are in critical or declining status may receive lump-sum funds to make benefit payments until 2051. These funds may only be used to pay plan benefits and administrative expenses. Plans that reduced pension benefits under the Multiemployer Pension Reform Act (MPRA) must reinstate those benefits if the plans are approved for these funds.
The Local 138 Pension Plan covers 1,723 participants in the transportation industry. It will receive $112.6 million in assistance. The Signatory Employers-Laborers Pension Plan covers 682 participants in the construction industry and will receive $13.9 in assistance. Without these funds, both plans were projected to be insolvent in 2022. Once they became insolvent, participants’ benefits would be reduced to the PBGC guarantee levels, which is roughly 15-20% of benefits that were promised.
The PBGC estimates that the program will provide an $94 billion in assistance in total. The program not only protects the critical and declining pension plans and the workers and retirees they serve, but also protects the PBGC’s multiemployer insurance program itself. Before this assistance program, the multiemployer insurance program was projected to become insolvent in 2026 because it was expected to provide benefits for multiple insolvent plans. Because this assistance program prevents plans from insolvency, the PBGC’s multiemployer insurance program is expected to remain healthy.