The Klein-Miller Multiemployer Pension Relief Act of 2014, called MPRA, created a very narrow exception to the rules under ERISA that allow very severely troubled pension plans to suspend vested benefits if strict criteria are met. The Iron Workers Local 17 Pension Fund was eligible to file an application under MPRA because it is in imminent danger of becoming insolvent. That is, it is projected to run out of enough money to pay all monthy benefits owed in 2024 even after counting all investements and employer contributions.
If the Pension Fund is left on its current course toward insolvency in 2024, all Participants who are receiving a benefit greater than the PBGC guaranteed rate, which is not more than $35.75 per credit (and less for some), will have their monthly benefit reduced to 100% of the PBGC rate. Only Participants with benefits less than the PBGC rate will be exempt from the reduction to their monthly benefits. Additionally, please understand that this $35.75 per credit is only guaranteed as long as the PBGC is able to provide the Pension Fund with financial assistance. At this time, the PBGC is also facing a projected insolvency.
The Iron Workers Local 17 Pension Fund filed Its updated application under MPRA on July 29, 2016. The U.S. Department of Treasury determined on Friday, December 16, 2016 that the Proposed Suspension Plan filed by the Iron Workers Local 17 Pension Fund meets the narrow statutory requirements under MPRA. A copy of the approval can be found at www.treasury.gov/mpra.
The approved Suspension Plan seeks to incrementally restore the funding of the Pension Fund through the reduction of already accrued benefits. These reductions include: i) the reduction of the average accrual rate earned to $72; ii) the modification of the early retirement factor for those early retirees that retired with an unreduced benefit before the age of 62; and iii) the elimination of extra credits earned prior to the time when the benift schedule was changed to requrie 1900 hours a year for only one full credit. While these changes impact the Participants differently, Treasury determined that the reductions meet the statutory requirement of being equitably distributed among all of the Participantss subject to the Suspension Plan.
Even though this Pension Fund is made up of active and former iron workers, retirees and beneficiaries and surviving spouses of deceased iron workers, it is important to understand that the Suspension Plan reductions do not apply to a large group of Participants in this Pension Plan. If you fall into one of the following groups, the Suspension Plan WILL NOT APPLY TO YOU:
Particiapnts over the age of 80 as of February 28, 2017;
Anyone retired from the Pension Fund on a Disability Pension;
New participants who started as iron workers since November 2004 because they are only earning $50 credits with no option for extra credits;
Beneficiaries and surviving spouses who are receibing survivor benefits that generally equal 50% of the benefit the Participant earned;
Other Participants who had few years of service or who earned their credits under the lower benefit accrual rates, (so their monthly benefit is less than 110% of the rate the PBGC would pay when the Pension Fund becomes insolvent in 2024--equivalent to $39.23 per credit).
Other Participants will face a limited impact. If you fall into one of these groups, the reduction you receive under the Suspension Plan will be limited.
Participants who are between the ages of 75 and 80 by the end of February, 2017. These Participants wil receive a lesser reduction depending on their age. For example, someone who is age 79 will only receive 20% of the reduction that he would have received under the full Suspension Plan. This is because he is 80% of the way between age 75 and 80.
Participants who did not have long periods of service or worked when the accrual rate was lower may have benefits over the 110% of the PBGC guarantee rate but if the full reductions under the Suspension Plan is applied, their benefit would be reduced below the 110%. These Participants will also only have a partial reduction so their benefits do not go below the 110% limit.
After preparing calculations for the 1,995 Participants in the Pension Fund, we determined that the Suspension Plan will impact the benefits of Participants and Beneficiaries in the Pension Fund the following ways:
52% or 1,029 of Participants will not have any reduction
8% or 168 of Participants will have their benefits reduced up to 10%
10% or 197 of Participants will have their benefits reduced by 10 to 20%
13% or 265 of Participants wil have their benefits reduced by 20 to 30%
10% or 191 of Participants will have their benefits reduced by 30 to 40%
6% or 115 of Participants will have their benefits reduced byt 40 to 50%
Under 2% or 30 of Participants will have their benefits reduced by 50 to 60%
Although the Suspension Plan could not spread the reductions across the entire population of the Participants due to the restrictions under MPRA, the Suspension Plan has been determined to be equitable as a whole. This does not mean that the Participants will have the same level of reduction, as shown above. However, when all Participants are considered, the average monthly benefits will be reduced under the Suspension Plan by 20%, from $1,401 to $1,120.
Now that this Suspension Plan is approved by the Treasury, all Participants in the Pension Fund will have the opportunity to vote on the survival of the plan. A ballot packet will be mailed on December 30, 2016 to your home that includes the ballot and the procedure for voting. You will have the option to vote through the Internet, over the phone or by mail through a paper ballot. However, if you want your paper ballot to count, it must be mailed back so it is received prior to January 20, 2017. Ballots received later than this date cannot be included in the vote tally. Additional information on the voting procedure can be found at the Department of Treasury website www.treasury.gov/mpra.
The Department of Treasury will then review and certify the results of the vote within 7 days. If the majority of the Participants vote to approve the Suspension Plan, then the reductions will be made in the pension check for the February 1, 2017. Any Participant that is impacted by the reductions wil have the tax withholding for February 2017 reduced by the same percentage as the reduction of the gross monthly benefit under the Suspension Plan and new forms will be mailed to them during the month of February to allow them to make any further adjustments.
Now that the Suspension Plan has met the technical requirements of the MPRA, a majority of the Participants in the Pension Fund must determine the future of this Plan. All Participants and beneficiaries previously received a detailed notice and an Individual Estimate that gives you the amount of your benefit before and after the Suspension Plan if you vote YES. That Individual Estimate also gives the amount you will receive under 100% of the PBGC Guarantee at involvency if you vote NO. The choice is yours. If you do not vote by January 20, 2017, you will be counted as a YES vote as required under MPRA. Also please understand that if the majority of the Participants decide they do not want the Suspension Plan, the Board of Trustees does not have other options to reverse the projected insolvency in 2024.
The Board of Trustees has not taken these steps lightly and understands the reality that any of the reductions under the Suspension Plan will impact the lives of the retirees. However, voting YES and making the reductions now under this Suspension Plan gives the Participants and Beneficiaries the control to make equitable changes as allowed by MPRA to save the Plan. By voting NO on this Suspension Plan, the devastating impact will be spread to ALL Participants and Beneficiaries, including the Participants over 80 and on disablility pensions that are the least able to adjust. By voting NO, the resulting reductions will be much greater and with the uncertainty surrounding the PBGC's own solvency, pension benefits could actually be reduced to zero.