According to a recent article in Pensions and Investments, Western States Office and Professional Employees Pension Fund, Portland, OR, has filed for benefit relief for the third time. Previous applications have been withdrawn. The Treasury Department has 225 days to respond to this application.
According to the article, Western States has $336 million in assets and $525 million in projected liabilities. For a funded ratio of 64%. Heck, this looks to be pretty well-funded compared to many in the space. If nothing were to be done at this time, the plan is projected to become insolvent in 2036.
However, regular readers of this blog will know that proposed legislation to help Critical and Declining multiemployer plans is currently before a Joint Select Committee addressing solvency issues. We believe that it is premature for plans such as the Western States to be filing for benefit relief when there exists a real solution to this funding issue.
I have a real tough time accepting as a “solution” a benefit reduction of 30% for retirees less than 80 years old!! If you are over 80 – your benefits are protected. In addition, current actives and terminated vested workers will also see significant reductions in their projected benefits to the tune of 30%. How many 79 year-olds do you know that could go back into the workforce and makeup that 30% reduction in wages?
Waiting for the cavalry (Butch Lewis Act legislation (BLA)) is far more appealing than jumping into a benefit reduction process, especially since the Joint Committee is tasked with coming up with legislation by September 30th that will be fast-tracked before this session ends.
In the modeling that was done to support the BLA, 111 of 114 “critical and declining” plans were able to survive with just the loan from the Treasury Department (30-year balloon payment). The three that couldn’t survive on their own got assistance from the PBGC, including some plans that are forecast to go belly up by 2027.
We would recommend that this plan and any other considering benefit reductions wait until the Fall to see what emanates from this 115th Congress. They may just be surprised that real solutions to the funding crisis are currently being considered.