In yesterday’s post, we speculated that we might hear something by the end of the day regarding the acceptance or rejection of Local 138’s ARPA application for Special Financial Assistance (SFA). I’m thrilled to report that the PBGC sent out a press release yesterday afternoon announcing that Local 138’s application had been supported. According to the release the “Local 138 Pension Plan based in Baldwin, N.Y., which covers 1,723 participants in the transportation industry, will receive $112.6 million in special financial assistance, including interest to the expected date of payment to the plan.”
As we also mentioned in recent posts, “Final, Final Rules” on how to invest the proceeds have not been announced. In their release, the PBGC stated that they are reviewing the feedback received following the release of the “Interim Final Rules” in July and that the Final Rules “MAY” reflect some of the input. What seems apparent to me is the fact that the discount rate won’t be adjusted given that the SFA that has been approved for Local 138 would reflect the current discount rate of the 3rd Segment (PPA) plus 200 basis points. That is truly unfortunate, as the use of this rate dramatically reduces the potential SFA payment.
Any assistance that these struggling multiemployer plans get is terrific, but the thought that 30-years of future benefit payments would be secured is nothing but a pipe dream at this time. Let’s hope that those plans receiving the SFA can secure the benefit payments for the next 8-10 years, which would buy time for not only the legacy assets to grow unencumbered but perhaps a few tweaks to the current legislation should the PBGC’s “Final Rules” not meaningfully change. The next plan up is Idaho Signatory Employers-Laborers Pension Plan. More to come!