Pension Preservation Plan
On August 11, 2020, the United States Department of the Treasury (Treasury) officially notified the Local 807 Labor-Management Pension Fund (the Fund) that it had denied our Pension Preservation Plan to rescue the Fund under the Multiemployer Pension Reform Act of 2014 (MPRA). As a result, the proposed benefit reductions necessary to save the Fund from insolvency will not take place. These reductions were explained in the MPRA individualized statements mailed to each participant. Since the application was denied, there will not be a participant vote on the Pension Preservation Plan.
You can read the notice that was mailed to participants for more information.
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The Local 807 Labor-Management Pension Fund is seriously underfunded because of:
- Short-sighted government regulation;
- Unforeseeable stock market crashes in 2000 and 2008;
- Deep losses in contributing employers and hours worked; and
- Increased numbers of retirees whose benefits are funded by a decreased number of active members.
Over the last 18 years, the Trustees took all possible actions to keep the Fund going. However, there was no way to fix the underfunding problems.
If we do not take action now, the Pension Fund will run out of money in 10 years or less. At that point, our Pension Fund will have zero assets and will not be able to pay benefits to current and future retirees and beneficiaries.
If that happens, the Fund will then be taken over by the Pension Benefit Guaranty Corporation (PBGC), and all participants of the Pension Fund will face cuts across the board that will be higher than those in our Pension Preservation Plan.
The PBGC is projected to run out of money by 2025—in which case, all benefits could be reduced even more and might be completely eliminated.
There are no easy answers to the problems the Pension Fund faces, but there is a path forward through the Multiemployer Pension Reform Act of 2014 (MPRA). MPRA gives Trustees of funds like ours the ability to avoid insolvency and save their participants’ pensions by enacting a Pension Preservation Plan. However, the plan will involve sacrifices by most participants.
The Pension Preservation Plan implements a one-time benefit reduction (including benefits of retirees already collecting their pensions), within certain limits. The Fund must show the United States Treasury Department that the benefit reduction is neither too small to save the Fund nor larger than necessary. The Treasury Department must approve the Pension Preservation Plan,
Our Pension Preservation Plan will:
- Put the Fund back in a position where our future financial stability is as close to guaranteed as we can make it, and
- Allow the Fund to continue to pay benefits for the foreseeable future.
This is not an easy step for the Trustees to take, and we do not take it lightly. After much research and discussion, we have concluded that we have no alternative and no time to lose. If we do not take this step, the Fund will run out of money and participants will have to rely on the shaky Pension Benefit Guaranty Corporation (PBGC) and face much larger benefit cuts. Counting on the PBGC to protect the Plan is not a good option. If the PBGC runs out of money, as it is projected to do by 2025, EVERYONE will be out of luck—even those whose benefits cannot be cut under MPRA.
The Treasury Submissions
We submitted an initial application for MPRA relief to the Treasury Department on June 29, 2018 with a proposed pension preservation plan. While we were providing additional information that the Treasury Department wanted to support our application, the federal government shutdown closed the Treasury Department. By the time it reopened, it was too late to give the Treasury Department all of the information it needed to support our application. At the Treasury Department’s recommendation, we withdrew the application.
On December 30, 2019, we submitted a new application with a new Pension Preservation Plan. The new submission takes into account the issues raised by the Treasury Department in our prior application. We believe that the new preservation plan is fair and reasonable and that the Treasury Department has good reason to approve it.
What Happens Now?
In early January 2020, we mailed individualized notices to all participants explaining in detail our proposal to save your pension and the Pension Fund. The notices include personalized benefit amounts so you can see what the changes will mean for you—and what will happen to your pension if our application is not approved. We worked hard to keep the benefit reductions equitable and fair. Because of the way MPRA works, the percentage by which benefits will be reduced will differ based on a number of factors, including the participant's age at the time that the Pension Preservation Plan take effect.
The Treasury Department has up to 225 days to review our application. If it is approved, you will have an opportunity to vote on it. If you vote to approve the Pension Preservation Plan, the changes will take effect on or around November 1, 2020.
There are resources and documents available on this website to help you better understand how we got here and how the Pension Preservation Plan will work.
We will post updates and new documents to this site when they are available. Please check the site regularly.
The longer we wait, the larger benefit reductions will have to be. If we wait too long, no relief plan will be able to save the Plan. We need to have a Pension Fund that can take care of itself. The Pension Preservation Plan is our best and only option.