There are 18 multiemployer plans that “successfully” filed for benefit relief under MPRA. Benefit cuts in excess of 50% have occurred for some of the retirees bringing with them true hardship for the participant and their families. With the passage of the American Rescue Plan Act (ARPA) these participants and/or their beneficiaries will FINALLY get what was promised and earned. However, that repayment of lost benefits and the reinstatement of the original benefit payment may not come soon enough.
The Pension Benefit Guaranty Corporation (PBGC) has 120 days (roughly July 9th) since President Biden signed the legislation to provide guidelines on many aspects of the Act, including any prioritization for submission of applications for Special Financial Assistance (SFA). Fortunately, it appears that plans that initiated benefit suspensions are going to be given priority to file along with other entities based on the size of the SFA needed (> $1 billion), whether the plan may soon become insolvent (next 5 years) or based on other considerations (don’t you just love that language). However, there are estimated to be 61 Critical and Declining Plans, 112 plans in Critical status, and the 18 MEPPs that were granted relief. That is a heck of a lot of plans potentially filing between when the application process begins and December 31, 2025 when the filing window closes, except for those plans filing an amended application, which gives them until December 31, 2026.
Here is my concern. For those that have seen benefits slashed, they have to wait until the 120 days are up and the PBGC issues guidance, then they must wait for their plan to file an application. The PBGC has 120 days to approve the application from the time of receipt. If the application hasn’t been approved after 120 it is assumed to be accepted. Amazingly, the PBGC then has 1-year to provide the pension system with a lump sum distribution equal to the Special Financial Assistance. Once the plan receives the special financial assistance, they must restore the benefit cuts within the first month. Finally, they can reimburse lost benefit payments either within 3-months in a lump sum distribution or monthly for 5-years (no interest tacked on). Wow!
So, a plan participant who has lost a portion of their benefits for some time now (Iron Workers Local 17 Pension Fund had their application approved in March 2017), may have to wait 3+ years to finally get made whole? How is that fair? I say pay them now. We aren’t talking about a tremendous amount of money (although it is to the participant). When Super Storm Sandy hit Ortley, my insurance company paid me 40% of what they believed my claim would be on the day that they came to my home. As a result, I was able to begin the process of remediation right away. Why can’t we apply a similar process for the reinstatement of benefits? Legislation has been approved and the U.S. Treasury is on the hook to provide funding to the PBGC. Why not make a good faith deposit into the PBGC to begin the reimbursement process immediately? It wasn’t right that plan participants had their promised benefits slashed in the first place. Making them wait a considerable period now that legislation has passed is just pouring salt on their wounds. The hardship created by the cutting of benefits will not ease until restitution has been made.