Frequently Asked Questions
The Board of Trustees has prepared the following Frequently Asked Questions about the Pension Preservation Plan. They are organized by subject.
We will add to this list when we have new information and as we receive more questions from you.
If you have other questions or want more information, please call the Pension Preservation Plan Call Center at (833) 593-3023.
The Fund’s History, Finances & Investments
Multiemployer Funds like ours rely on investments and contributions to pay for benefits. When the investment markets crash, like they did in 2002 and 2008, the Fund’s investments lose a lot of their value. Even though the markets eventually recover, it takes many years of very high investment returns to make up for the value lost in the crashes. The stock market crash of 2000-2002 caused a 29.5% drop in the Fund’s assets, and the 2008 crash—the worst since the Great Depression—resulted in a 34.2% loss in assets.
Also, the Fund needs to receive contributions for enough active employees to cover the benefits it will have to pay for retirees, future retirees and beneficiaries. Over time, the number of active employees in the Fund has dropped significantly while the number of retirees has become much larger. As of today, retirees outnumber participants by more than five to one. What’s more, retirees are retiring earlier and living longer, resulting in larger total benefit payments that exceed the income the Fund gets from investments and contributions. This pattern has led to a decline in Fund assets.
Other factors that caused the Plan to be where it is today, include:
- A dramatic drop in the number of the Fund’s contributing employers. Since 2009, there has been a 20% drop in the number of contributing employers. That means fewer jobs for Local 807 members and fewer contributions coming in; and
- Shortsighted government regulations which prevented the Fund from saving for a rainy day when we had the resources to do so.
The Trustees rely on experienced investment professionals to provide expert advice and recommendations to the Trustees on where to invest the Fund’s assets. These professionals attend each Trustees’ meeting, report on the performance of each investment manager and provide updated market information. Because the Fund is governed by ERISA (the Employee Retirement Income Security Act of 1974), the investments are required by law to be diversified. This means the Fund's money must be invested in different types of investments and it cannot be too concentrated in one investment area. The Fund invests in a mix of stocks, bonds and real estate funds that were recommended by the Fund’s investment professionals and reviewed by the Fund’s Board of Trustees.
The Trustees cannot prevent companies from withdrawing. Companies may withdraw from the Fund because they ceased operations or went bankrupt or as part of contract negotiations. Many companies withdraw from multiemployer funds like ours to lower their labor/benefits costs. When a company withdraws, the Fund bills it for and aggressively pursues the collection of withdrawal liability (the employer’s share of the underfunding). But not all employers pay or have the assets to cover their withdrawal liability.
The Trustees have been working to protect the Fund’s assets by taking actions available under the law for as long as the Fund has been around. We increased contribution rates and changed benefits when permitted. We also implemented a Rehabilitation Plan in 2012 which increased contribution rates and eliminated certain benefits. Unfortunately, these actions have not been able to save the Fund.
Multiemployer Pension Reform Act (MPRA)
MPRA allows trustees of severely underfunded multiemployer pension funds like ours to develop benefit suspension plans (what we are calling a Pension Preservation Plan) that include benefit reductions for both active workers and retirees, in order to save the funds from becoming insolvent and enable them to continue paying benefits in the future. The funds then ask the Department of the Treasury to approve the benefit suspension plans. Pension funds across the nation are submitting applications for approval of their benefit suspension plans.
Under MPRA, the Fund generally must meet the following criteria:
- The pension fund must be certified to be in Critical and Declining Status by the fund’s actuary. The Fund’s actuary certified that the Fund is in Critical and Declining status starting in 2016. This means that the Fund is projected to run out of available resources in 2030 if the Pension Preservation Plan is not implemented, and
- The proposed suspensions must be enough to avoid insolvency, but not more than necessary to prevent insolvency for the foreseeable future.
The U.S. Department of the Treasury and the Department of Labor together oversee the Pension Benefit Guaranty Corporation (PBGC). If a Fund becomes insolvent, the PBGC takes over funding its benefits, but at a substantially reduced rate. MPRA designates the U.S. Department of the Treasury as the sole authority to review and approve or deny all multiemployer pension funds applications to suspend benefits.
MPRA requires that participants’ benefits not be suspended (reduced) to less than 110 percent of the amount guaranteed by the PBGC. The current maximum PBGC guaranteed monthly benefit is $35.75 per year of service. For example, for a participant who has 30 years of service, the maximum benefit guaranteed by the PBGC would be $12,870 per year (or $1,072.50 per month). MPRA does not place a specific limit on the percentage of a participant’s benefit that may be suspended.
MPRA amends portions of ERISA and the Internal Revenue Code and includes, for the first time, rules for suspending previously protected, accrued benefits, including retiree benefits.
Our Proposed Pension Preservation Plan
A benefit suspension is a reduction of any current or future payments from the Fund to any participant or beneficiary. In order for suspensions to take place, the Fund has to submit an application (our Pension Preservation Plan) showing that the proposed pension benefit suspensions meet the requirements of MPRA, including showing that the suspensions are necessary and sufficient to keep the Fund from running out of money in the long run. Additionally, the Fund must show that the proposed benefit suspensions do not exceed the amount necessary to keep the Fund solvent.
We submitted our new Pension Preservation Plan on December 30, 2019. The Treasury Department will review our submitted Pension Preservation Plan and must provide a response within 225 days from the date of submission (in August of 2020). If the Treasury Department approves the Pension Preservation Plan, you will then have the opportunity to vote on whether the Pension Preservation Plan should be implemented. MPRA requires that the voting process be conducted by an independent party and will generally be completed within 30 days. If you vote to accept the Pension Preservation Plan, it will go into effect on November 1, 2020. If you vote to reject the Pension Preservation Plan, it will not go into effect.
If the Pension Preservation Plan is approved, it is scheduled to go into effect on November 1, 2020.
We have worked very hard to create a series of benefit suspensions that are equitably distributed among all of the groups of participants and beneficiaries in the Pension Fund. MPRA requires that all benefit suspensions be fair, but not necessarily equal. Because of the way the law works, the percentage of benefits to be suspended will differ based on factors including the participant’s age at the time of the suspension.
Over the last several years, we have considered many different options to try and save the Fund. We determined that the Pension Preservation Plan provides the best opportunity for long-term health of the Fund and future benefits for our participants.
Since the 2000 recession, the Fund has repeatedly cut back the future benefits to be received by the members who were active at that time. We have also increased the contribution rates that employers pay into the Fund on your behalf. We cannot keep reducing accrual rates and changing benefits for active employees. And we cannot keep asking employers to contribute more. MPRA allows us to spread the changes across retirees and actives so we all share in the effort to preserve our Pension Plan.
Today, the Fund is paying out almost $20 million more in retiree benefits a year than it is receiving in employer contributions. That deficit will continue to grow if we don’t take immediate action to fix the problem. The longer we wait, the bigger the benefit suspensions will need to be to save the Fund. If the Trustees wait too long, it will be too late to keep the Fund from becoming insolvent. If that happens, your benefit would be reduced to the amount guaranteed by the PBGC, which is less than the amount you would receive after the suspension. And, if the PBGC also runs out of money, which is very possible, your benefit could be reduced to almost nothing.
The law does not permit the suspensions to be spread out.
No, the law specifically requires that the suspensions be enough to keep the Fund solvent. Lesser suspensions would not be expected to keep the Fund solvent.
Due to the Fund’s deficit, we do not have enough money to provide lump sum payments to every participant.
If your benefit is reduced by the Pension Preservation Plan, your joint and survivor benefit will be reduced accordingly.
Yes, but it will depend on how the QDRO is structured.
The Pension Preservation Plan takes into account the expected decline in active participants. The Pension Preservation Plan is based on many assumptions including hours worked and expected investment returns. These assumptions were selected based on the Fund’s recent experience, expected market conditions and Trustee input. MPRA requires that benefit suspension plans must be projected to allow the Fund to continue to be able to pay pensions indefinitely. The Fund’s actuary must certify—and the U.S. Department of the Treasury must agree—that the benefit suspension plan is sustainable before it can be approved and implemented. Once our proposed Pension Preservation Plan is implemented, the Fund’s deficit will begin to decrease, which will eventually allow the Fund to stabilize—and hopefully even grow.
Yes. Fund Trustees and Local Union Officers who are participants are treated like all other participants in this Pension Fund. Everyone is subject to the same rules for benefit suspensions under the proposed Pension Preservation Plan.
Under MPRA, participants receiving a disability benefit are protected from reductions under a Pension Preservation Plan. However, if our Pension Preservation Plan is rejected and the Fund becomes insolvent and the PBGC takes it over, all Fund participants including you will face pension cuts regardless of age or disability status.
Over the last decade, active employees have seen their accrual rates reduced and faced many other benefit changes. The Pension Preservation Plan should be the last cut that they will face for the foreseeable future.
The rules are set by law. According to MPRA, retirees over age 80 on the date that the proposed Pension Preservation Plan goes into effect are not subject to cuts. Retirees between ages 75 and 80 are subject to a sliding scale of reductions based on their age at the time the MPRA suspensions take effect. The closer you are to age 80, the lesser the reduction you will have. However, if our Pension Preservation Plan is rejected, the Fund becomes insolvent and the PBGC takes it over, all Fund participants will face the same large pension cuts regardless of age or disability status.
While you are exempt from the suspensions under our Pension Preservation Plan, you are not exempt from cuts that would be imposed by the PBGC. If our Pension Preservation Plan is not approved and the Pension Fund becomes insolvent, the PBGC will cut everyone’s pensions across the board—including yours. Further, if the PBGC itself becomes insolvent, your pension could be reduced even further or eliminated altogether.
No. Your benefits will remain at the same reduced rate for as long as you continue collecting a pension, per the rules established under MPRA. The age protections are based on your age on the date that the suspensions become effective. If you are 75 or older on the date when they take effect, the age protections will apply to you. Otherwise, they will not.
We designed the Pension Preservation Plan to be a one-time fix for our Fund. However, the Fund is still subject to a variety of external factors that are completely outside our control and which change over time, such as the state of the economy, government regulations, and investment returns. The Trustees took these factors into account as we developed the proposed Pension Preservation Plan, but we cannot guarantee that the reasonable assumptions we make now will not be affected by future events.
You will receive a personalized benefit estimate at your home address after January 1, 2020. Contact the Fund Office if you do not receive your estimate or if you believe the information included on your estimate is incorrect.
The benefit suspensions might be restored if the Fund’s overall funding improves to the point where it is no longer underfunded. In order for this to happen, membership and hours worked both need to increase significantly.
Yes. You are facing the same cuts that active participants will face.
Pension Preservation Plan Application and Voting Process
All Fund participants can vote on the Pension Preservation Plan once it is approved by the Treasury Department. Fund participants are active members, retirees, terminated vested participants and surviving beneficiaries.
If the Treasury Department rejects the Pension Preservation Plan, there will be no vote and the Pension Preservation Plan will not go into effect. At that point, the Board of Trustees has two options for the Pension Fund. Either our Pension Fund will go insolvent and be turned over to the PBGC in the next 10 years, or our Pension Preservation Plan can be amended and re-submitted to the Treasury Department. Under both options, the cuts would be larger than those proposed in our current Pension Preservation Plan.
The Treasury Department has sole responsibility for the voting process. The 21-day election period must take place within 30 days of approval of the Pension Preservation Plan, according to MPRA. That means the election could be held in September of 2020, depending on how long the Treasury Department takes to approve our application. The election will be held through an online ballot and will be conducted by a Treasury Department-selected third-party administrator. All Fund participants can vote on the Pension Preservation Plan, including active members, retirees, terminated vested participants and surviving beneficiaries.
MPRA requires that our Pension Preservation Plan be approved by the Treasury Department before it goes to a vote. Then the Pension Preservation Plan must be voted on by Fund participants. It can only be implemented if the Treasury Department approves it and it is not rejected by a majority of all eligible voters.
Pension Benefit Guarantee Corporation (PBGC)
The PBGC is a federal agency that was created to insure pensions and cover payments in the event that a pension fund runs out of money. When the PBGC assumes pension payments, payments are automatically cut to mandated levels. While many pension funds are currently in trouble and projected to become insolvent, the PBGC itself is projected to become insolvent by 2025. If that happens, pension benefits for funds administered by the PBGC would be reduced or eliminated.
No, the PBGC will not make up for any of the benefit reductions. The PBGC only gets involved and funds benefits if the Fund becomes insolvent.
The Trustees will comply with any future laws and regulations that govern our Fund, and we will review any future legislation that could potentially address the Fund’s solvency problems. In the meantime, we cannot wait for Congress to act. If we do not address our Fund’s issues now and helpful legislation is not enacted, the Fund will become insolvent.
If you have elected a fixed dollar amount of withholding, you may want to consider reducing the amount withheld for taxes. If you have taxes withheld as a percentage or based on normal withholding, once the benefit is reduced, the amount of taxes withheld will be reduced automatically.
The Pension Preservation Plan only affects Pension Benefits. The Pension Preservation Plan does not impact the health plan or any other benefit plans in which you participate.
Please contact the Fund Office in writing to explain your concern and request a review of your calculation.
You can contact the Pension Preservation Plan Call Center: (833) 593-3023, Monday through Friday, from 9am to 5pm, EST. The Call Center is closed on weekends and holidays.