As Athene takes control of pension plan assets, it seeks to profit by earning more from investment returns than it is required to pay out to recipients. Athene uses Bermuda-based reinsurance subsidiaries to reinsure most deposits. Apollo manages most of Athene’s assets in exchange for fees. Apollo invests some of Athene’s assets in loans and structured debt products originated or securitized by Apollo affiliates.
Apollo Global Management created Athene in 2009 and has managed its assets since its inception. On March 8, Apollo announced its plan to acquire and merge with Athene.
UNITE HERE’s new website will provide information and resources to the beneficiaries of plans taken over by Athene. It includes facts about the recent JCPenney transaction, links to reporting on Athene’s investment practices, and contact information for relevant regulatory agencies. Beneficiaries can use the site to sign up for updates.
By lunchtime Tuesday we should know whether the Wells Fargo & Co. shareholders adopted a proposal to have the company conduct a racial-equity audit, an idea championed by a pension fund shareholder affiliated with the Service Employees International Union.
Wells Fargo and other big banks have recommended shareholders vote down these racial-equity audit proposals, a feature of this year’s annual shareholder meeting season.
The banks are likely to have the votes, but hopefully they don’t put the whole idea into a file and forget about it.
Conditions on Relief • Special Financial Assistance funds (and earnings thereon) can be used to make benefit payments and pay plan expenses • Must be segregated from other plan assets; invested only in investment-grade bonds or other investments as permitted by PBGC • Deemed to be in critical status until the last plan year ending in 2051 • Plans that become insolvent after receiving relief subject to rules for insolvent plans • Must reinstate any previously suspended benefits under the MPRA – Either as lump sum within 3 months or monthly equal installments over 5 years (to begin within 3 months) • Not eligible to apply for a new suspension of benefits under the MPRA
Author(s): Alan Cabral, Jim Hlawek, Seong Kim, Ron Kramer
Contribution Requirements. Callan expects that higher discount rates and longer periods for shortfall amortization probably will reduce pension plan sponsors’ contribution requirements. Further, they expect that effect to be greatest for plans with smaller normal costs and/or larger funding shortfalls. Callan continues that if smoothing is ever fully phased out, they anticipate contribution requirements would increase as discount rates “finally decline from historical highs to match market conditions,” but they also add that the longer amortization period “does provide a permanent reduction in annual cash requirements.”
The changes to the minimum funding requirements, Cheiron says, will result in lower minimum funding requirements. They will not affect segment rates used for other purposes such as calculation of lump sum benefits and the maximum deductible limit.
Seyfarth Synopsis: On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021 (“ARPA”), the $1.9 trillion COVID-19 relief bill. ARPA includes various forms of multiemployer and single employer pension plan relief, as well as certain executive compensation changes under Section 162(m) of the Internal Revenue Code (“Code”), which are discussed further below. Please see our companion Client Alert on the other employee benefit items of interest in ARPA here.
Author(s): Seong Kim, Christina M. Cerasale, Kaley M. Ventura, Alan B. Cabral
Since withdrawal liability represents the excess of the plan’s liabilities over its assets, some employers may expect that this massive influx of cash would reduce or eliminate their withdrawal liability. As of this date, however, the impact of EPPRA on an employer’s ultimate liability is unclear. The law as originally passed by the House of Representatives expressly excluded any financial assistance from the withdrawal liability calculus for a period of 15 years. However, this fund-friendly provision was struck from the bill during the Senate approval process and was not in the bill signed by President Joe Biden. In other words, under current law (e.g., EPPRA) and in the absence of anticipated regulations, an employer’s withdrawal liability could potentially be reduced or eliminated in its entirety. Unfortunately for employers, however, there is a catch.
Under EPPRA, PBGC is authorized to “impose, by regulation or other guidance, reasonable conditions on an eligible multiemployer plan that receives special assistance relating” to both “reductions in employer contribution rates” and “withdrawal liability.” The 15-year provision and the broad and express regulatory authority granted to PBGC by the statute has many practitioners (including the authors) expecting that PBGC will issue guidance similar to the excised provision. The most likely scenario is that an employer’s withdrawal liability will be calculated without regard to any EPPRA “special financial assistance” for a period of 15 years (consistent with the excised provision) or 10 years (the period for which MPRA benefit suspensions are disregarded for withdrawal liability purposes under ERISA Section 305(g)). Until PBGC issues this much-needed guidance, the exact impact of EPPRA on employers will be unknown.
Author(s): Paul Friedman, Robert Perry, David Pixley
This account of the Teamsters’ drive to save retirement plans for millions of pensioners is drawn from interviews with several of the union’s officials, congressional sources and the public record. It begins with one Hoffa, the late Teamsters chief James R. Hoffa, and the Central States pension fund he started. And it ends with a yearslong campaign by his son, James P. Hoffa, to work the levers of influence in Washington to salvage the retirement money of union members.
Every Republican voted against the Covid-19 relief measure, and many of them specifically targeted the pension legislation for derision because they said it was an expensive gift from Democratic leaders to labor allies that would be funded by taxpayers.
“Americans know this bill will benefit states and unions that have been poorly mismanaged,” Rep. Lauren Boebert, R-Colo., said on the House floor.
In 2018, administrators of the Western Pennsylvania Teamsters and Employers Pension Fund announced it would cut benefits by 30% for 17,000 Pittsburgh-area retirees or their beneficiary survivors. The cut was needed to avoid insolvency and an accompanying collapse of the pension structure. Now, it is expected that those cuts will be restored.
Pension protection is critical, both for its morality and for its necessity. Pensions are a lifeline for older citizens. They should not lose their retirement money at the time they are depending on it — when they are no longer able or intending to work. The alternative reasonably could be poverty.
Were it not for the language in the new federal law, many people who spent decades toiling in union jobs would be in jeopardy of losing their benefits through no wrongdoing on their part. Forces conspired to put their retirement plans at risk. These are plans that were negotiated. These are plans that were promised. Nonetheless, many of the employers have gone out of business and have left their pension liabilities inadequately funded.