Tag Archives: multiemployerplans

04.01.24
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ARPA Update as of March 29, 2024

By: Russ Kamp, Managing Director, Ryan ALM, Inc.

Good morning, and welcome to a new month/quarter. Still feels like winter in the northeast! But there has been a thaw with regard to activity at the PBGC as they implement the ARPA legislation.

Happy to report that the Pension Plan of the Moving Picture Machine Operators Union Local 306 and the New England Teamsters Pension Plan both submitted applications seeking SFA. The Machine Operators, a priority group 5 member, is seeking $19.4 million for its 542 participants, while the NE Teamsters are hoping to capture more than $5.4 billion in SFA for just over 72k plan members. If the NE Teamsters are successful, they will have received the second largest grant to date only trailing the Central States Teamsters whopping $35.8 billion. To date, there have been 5 awards of greater than $1 billion. Currently, there are four plans seeking >$1 billion that are under review including the NE Teamsters.

In other news, the United Food and Commercial Workers Union Local 152 Retail Meat Pension Plan, had its application approved for an SFA grant of $279.3 million which will support the benefits for 10,252 members. There were no applications denied or withdrawn during the previous week. In addition, there were no pension funds added to the waitlist that continues to have 86 potential applications waiting to submit an application from the initial 113 members.

The upcoming week will provide some insight into the continuing strength of the US labor market with the ADP and US employment releases as well as the weekly initial claims data. However, it doesn’t appear that market participants are waiting to see what those data sets reveal as US Treasury bonds and notes are seeing a big move up in yields today. This movement hurts total return focused fixed income products, but it provides those pension plans with more attractive yields for cash flow matching assignments. Higher yields mean lower cost to defease future benefit payments. Very nice!

03.25.24
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ARPA Update as of March 22, 2024

By: Russ Kamp, Managing Director, Ryan ALM, Inc.

“March Madness” is upon us. How’s your bracket doing? I still have my champion in the running, but not much more than that.

The past week was very quiet with regard to the ARPA legislation and activity associated with its implementation. We did have one fund submit an application for Special Financial Assistance (SFA). United Food and Commercial Workers Union and Participating Food Industry Employers Tri-State Pension Plan, a Priority Group 6 member, submitted a revised application on March 16th. This fund is seeking SFA in the amount of $638.3 million for the fund’s 29,233 members. The PBGC will now have until July 14, 2024 to act on the application.

Besides the filing by the UFCW, there was little to show last week, as there were no applications approved, denied, or withdrawn. Furthermore, unlike the prior week, there were no additions to the waitlist which continues to have 113 funds listed of which 27 have been invited to submit an application. To-date, 71 funds have received SFA in the amount of $53.6 billion. These proceeds include the grant, interest, and any FA loan repayments.

Like the picking of the NCAA tournament bracket, for which there are no perfect submissions remaining, the capital markets are highly uncertain. Yes, the US equity market has enjoyed a robust 5-6 months period, but how predictive is that for the next six months or longer? Those yet to receive the SFA should seriously consider an investment strategy that takes the uncertainty of the markets out of the equation. I am specifically referring to the use of investment grade bonds to defease the promised benefit payments as far into the future that the SFA allocation will cover. Once the matching of asset cash flows to the plan’s liability cash flows is done, that relationship is locked in no matter what transpires in the capital markets. Any risk taken by recipients of these assets should be done in the legacy portfolio where a longer investing horizon has been created. Fortunately, US interest rates remain elevated significantly from when the ARPA program began in 2021. The timing couldn’t have been better.

03.18.24
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Overpayment of SFA to be Refunded

By: Russ Kamp, Managing Director, Ryan ALM, Inc.

As those who regularly follow the Ryan ALM Inc. blog know, we report each week on the status of the PBGC’s effort to implement the ARPA legislation for multiemployer plans. In those updates, we have been reporting that the apparent slowdown in the processing of the special financial assistance (SFA) applications had to do with incorrect population surveys funds that have filed applications and in some circumstances have received SFA payouts.

We are finally starting to get some clarity on the situation in terms of who is involved and what is required of the funds that have received excess SFA grant money. In the most notable example, Central States, Southeast & Southwest Areas Pension Plan (CS) which received $35.8 billion in SFA in December 2022, has been informed that an excess SFA payment of $127 million was granted. This was the result of including 3,479 deceased participants in the eligible population. As a result, CS is required to repay the excess grant proceeds.

According to the Department of Labor, there are no consequences for those plans that have received excess grant money provided that they return those funds. According to a ai-cio.com article, “the DOL noted that this mistake was not made by the pension plan.” Unfortunately, the PBGC did not use the Social Security Administration’s death master file (DMF), a database that pension plans can’t access, when initially auditing SFA applications. They have since begun to use the DMF as of November 2023. “While these excess payment amounts may represent only a small fraction of total SFA payments, they would not otherwise have been paid and, as such, must be refunded to the United States government,” the PBGC said in a statement.

03.04.24
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ARPA Update as of March 1, 2024

By: Russ Kamp, Managing Director, Ryan ALM, Inc.

Welcome to March. It is said that the weather in the Northeast comes in like a lion and exits like a lamb. Is the same true for markets? Given a lot of the crosscurrents in the markets from geopolitical concerns, equity valuations, AI, interest rates, and Fed policy, who knows what is in store for us this month and beyond.

That said, we can with near certainty discuss what transpired during the last week as it relates to ARPA and the PBGC’s implementation of that critical legislation. I say with near certainty only because the weekly updated spreadsheet provided by the PBGC didn’t have a couple of actions from 2/23/24 that were only added in the March 1st update. Specifically, Union de Tronquistas de Puerto Rico Local 901 Pension Plan, a Priority Group 1 member, has once again withdrawn its application. They are seeking >$37 million for the 4,029 participants. In other delayed news, the American Federation of Musicians and Employers’ Pension Plan, a much larger fund and a Priority Group 6 member, has also withdrawn its revised application. They are in pursuit of an SFA grant that would provide the fund with $1.44 billion in SFA plus interest for more than 49k participants.

Now that we are caught up, this past week (ending 3/1/24) saw some activity, too. Two members from the waiting list entered their applications through the PBGC’s portal, including the Kansas Construction Trades Open End Pension Trust Fund and the Pacific Coast Shipyards Pension Plan. Both plans have submitted revised applications. Kansas Construction is seeking $40.7 million for its 8,145 participants, while the Shipyards plan is striving for $17.8 million for 507 participants, which is 35,108/participant compared to the roughly $5,000/participant for the Kansas plan.

In other ARPA news, there were no applications approved or denied during the previous week. There was one application withdrawn (2/26), but the Pacific Coast Shipyards quickly resubmitted the application by 3/1. In somewhat surprising news, there is a late arrival to the waitlist – # 113! Plasterers Local Union No. 1 Pension Plan joined the list on 2/26/24. They have also locked in the valuation date of November 30, 2023.

Have a great week. In the meantime, please don’t hesitate to reach out to us if we can be of any assistance to you as it relates to this legislation.