SFA Application: Through the Forest and Into the Weeds

Link:https://burypensions.wordpress.com/2021/10/25/sfa-application-through-the-forest-and-into-the-weeds/

Excerpt:

The Road Carriers Local 707 Pension Fund , which was the first plan to seek bailout money under the PBGC Special Financial Assistance (SFA) program for troubled multiemployer plans, has their 425-page application uploaded on the SFA website.

…..

412-425) SFA calculations which is a fairly simple spreadsheet calculating the present value of the liabilities of all current participants (pages 419-420) and coming up with one amount ($706,400,534) to cover all their liabilities through 2051. New entrants presumably will be covered by new negotiated contributions and, after 30 years though if any of the current participants survive until 2051 they will presumably need another bailout.

The problem PBGC has with this filing appears to be that an interest rate of 5.32% was used for valuing liabilities which happens to be 2% plus the first HATFA Segment Rate when it is the third PPA Segment Rate to which the 2% should have been added. Per the IRS website (scroll down a little to Funding Table 3), that rate would likely have been the April, 2021 rate of 3.52% which would have made 5.52% the rate to be used for valuing liabilities (thus lowering the liability value as the higher the interest rate the lower the value). The tricky part is that the PPA third Segment Rate has been going down and is now 3.34% as of October, 2021.

Author(s): John Bury

Publication Date: 25 Oct 2021

Publication Site: burypensions

SFA New Filing; First In a Month

Link:https://burypensions.wordpress.com/2021/10/23/sfa-new-filing-first-in-a-month/

Graphic:

Excerpt:

Plan NameLocal Union No. 466 Painters, Decorators and Paperhangers Pension Plan
EIN/PN: 14-6085295/001
Total participants @ 4/30/20: 45 including:
Retirees: 30
Separated but entitled to benefits: 8
Still working: 7

Asset Value (Market) @ 5/1/19: $523,604
Value of liabilities using RPA rate (3.09%) @ 5/1/19: $5,108,203 including:
Retirees: $4,213,315
Separated but entitled to benefits: $820,490
Still working: $74,398

Funded ratio: 10.25%

Author(s): John Bury

Publication Date: 23 Oct 2021

Publication Site: burypensions

10 States Didn’t Pay Off Unemployment Loans Ahead of Interest Deadline

Link: https://www.route-fifty.com/finance/2021/09/10-states-didnt-pay-unemployment-loans-ahead-interest-deadline/185172/

Graphic:

Excerpt:

At least four states paid back money in the last week they borrowed from the federal government to cover unemployment benefits—narrowly avoiding additional interest on the loans.

Hawaii, Nevada, Ohio and West Virginia announced the loan repayments within the last week. A remaining 10 states have a combined outstanding balance of more than $45 billion that they will now begin to accrue interest on, according to the Treasury Department.

When states exhaust their unemployment trust funds, they are allowed to borrow money from the federal government to ensure benefits continue to be paid. Twenty-two states took out what are referred to as Title XII advances during 2020. The loans were initially interest free, but starting Monday, states with outstanding loans began to accrue 2.3% interest on the borrowed sums.

Author(s): Andrea Noble

Publication Date: 7 September 2021

Publication Site: Route Fifty

ARP: “Actuarial Equivalent of a Guillotine”

Excerpt:

Right now on the American Rescue Plan (ARP) website:

Status of Applications [.xls] – Coming Soon

Until those spreadsheets start popping up we have no clue as to why, by whom, and how these bailout applications are being made but, before seeing any numbers, one thing bothers me.

A footnote on that ARP website reads:

**MPRA plans can restore benefits under 26 CFR 1.432(e)(9)-1(e)(3) at any time, including before applying for SFA.

So why aren’t plan participants like Carol Podesta-Smallen in the MarketWatch story not having their monthly pension amounts restored to pre-MPRA levels and getting large checks to make up for past reductions? It would reduce asset values in those plans but isn’t that a good thing when applying for bailout money?

Author(s): John Bury

Publication Date: 31 August 2021

Publication Site: burypensions

‘I’ll be robbed twice in one lifetime’: Retirees fearing financial disaster wait for pension rescue

Link: https://www.marketwatch.com/story/ill-be-robbed-twice-in-one-lifetime-retirees-fearing-financial-disaster-wait-for-pension-rescue-11630018883

Graphic:

Excerpt:

A law passed in Congress earlier this year promised to reverse some of that damage by offering taxpayer-funded financial assistance to certain troubled pension plans like Podesta-Smallen’s, allowing them to restore benefits to retirees who suffered cuts. But the implementation of the rescue plan has been met with a barrage of criticism from plan trustees, participants and members of Congress who say it’s too tight-fisted with the financial assistance and could leave some plans in a worse financial position than they are in now.

….

When the American Rescue Plan was signed into law in March, many of these struggling plans and retirees with sharply reduced benefits thought their troubles were over. The law is expected to provide about $94 billion to eligible multiemployer plans through a financial assistance program designed to stabilize the plans for decades to come and reinstate previously reduced benefits.  

The sense of relief was short-lived, plan trustees and participants say. The Pension Benefit Guaranty Corp., the federal agency charged with protecting the retirement incomes of participants in private-sector defined-benefit pension plans, in early July released regulations detailing the formula for calculating the financial assistance for troubled plans.

In interviews and more than 100 comment letters to the PBGC, plan trustees, consultants, participants and lawmakers say that the rule’s stringent approach to calculating financial assistance means that many plans receiving the assistance won’t make it through the next 30 years as Congress intended, and some won’t even get enough money to cover the benefits they must restore as a condition of getting the cash.

Author(s): Eleanor Laise

Publication Date: 30 August 2021

Publication Site: Marketwatch

PBGC Issues Interim Final Rule on Multiemployer Bailout Plan

Link: https://www.ai-cio.com/news/pbgc-issues-interim-final-rule-on-multiemployer-bailout-plan/

Excerpt:

There are four types of multiemployer plans that are eligible to apply for SFA under the PBGC’s regulation:

A plan in critical and declining status as defined by the Employee Retirement Income Security Act (ERISA) in any plan year beginning in 2020, 2021, or 2022.

A plan that had enacted a suspension of benefits approved under ERISA as of March 11, 2021.

A plan certified to be in critical status as defined by ERISA that has a modified funded percentage of less than 40%, and a ratio of active to inactive participants of less than 2:3, in any plan year beginning in 2020, 2021, or 2022.

A plan that became insolvent for purposes of section 418E of the Internal Revenue Code (IRC) after Dec. 16, 2014, when the Multiemployer Pension Reform Act (MPRA) became law, has remained insolvent, and has not terminated under ERISA as of March 11, 2021.

PBGC has prioritized seven groups of plans that qualify for the aid, ranked by the most impacted plans and participants first. The highest priority is given to applications of plans that are projected to become insolvent under ERISA by March 11, 2022, so that they will not have to reduce participant benefits, and to plans that are already insolvent, to help them reinstate benefits, provide makeup payments to participants and beneficiaries, and restore previously suspended benefits.

Author(s): Christine Giordano

Publication Date: 14 July 2021

Publication Site: ai-CIO

PBGC Multiemployer Pension Bailout – The Weeds

Graphic:

Excerpt:

The Pension Benefit Guaranty Corporation (PBGC) on July 9, 2021 announced an interim final rule implementing a new Special Financial Assistance (SFA) Program for financially troubled multiemployer defined benefit pension plans.

What struck me:

…..

It is expected that over 100 plans that would have otherwise become insolvent during the next 15 years will instead forestall insolvency as a direct result of receiving SFA. Section 9704 of ARP amends section 4005 of ERISA to establish an eighth fund for SFA from which PBGC will provide SFA to multiemployer plans under the program created by the addition of section 4262 of ERISA. The eighth fund will be credited with amounts from time to time as the Secretary of the Treasury, in conjunction with the Director of PBGC, determines appropriate, from the general fund of the Treasury Department. Transfers from the general fund to the eighth fund cannot occur after September 30, 2030. (page 6)

Unlike the financial assistance provided under section 4261 of ERISA, which is in the form of a loan and provided in periodic payments, a plan receiving SFA under section 4262 has no obligation to repay SFA, and PBGC must pay SFA in the form of a single, lump sum payment. (page 7)

Author(s): John Bury

Publication Date: 10 July 2021

Publication Site: burypensions

PBGC to Provide Special Financial Assistance to Troubled Multiemployer Plans

Link: https://www.pbgc.gov/news/press/releases/pr21-05

Released rule pdf: https://www.pbgc.gov/sites/default/files/sfa/4262-ifr-final-posted.pdf

Excerpt:

WASHINGTON, D.C. — The Pension Benefit Guaranty Corporation (PBGC) today announced an interim final rule implementing a new Special Financial Assistance (SFA) Program for financially troubled multiemployer defined benefit pension plans.  

“The American Rescue Plan provides funding to severely underfunded pension plans that will ensure that over three million of America’s workers, retirees, and their families receive the pension benefits they earned through many years of hard work,” said PBGC Director Gordon Hartogensis. “These benefits are critical to the economic security of so many retirees and their families.” 

The American Rescue Plan (ARP) Act of 2021 (P.L. 117-2) — a historic law passed by Congress and signed by President Biden on March 11, 2021 — contains provisions to provide an estimated $94 billion in assistance to eligible plans that are severely underfunded. Additionally, it assists plans by providing funds to reinstate previously suspended benefits. ARP also addresses the solvency of PBGC’s Multiemployer Insurance Program, which was projected to become insolvent in 2026.  

The interim final rule sets forth what information a plan is required to file to demonstrate eligibility for SFA and the formula to determine the amount of SFA that PBGC will pay to an eligible plan. ARP authorizes PBGC to prioritize SFA applications of plans in specified groups, and the interim final rule identifies the priority order in which such plans are permitted to apply. The interim final rule also outlines a processing system, which will accommodate the filing and review of many applications in a limited amount of time. In addition, it specifies permissible investments for SFA funds and establishes certain restrictions and conditions on plans that receive SFA. 

The interim final rule is posted on PBGC’s website today, July 9, 2021. The rule is also on public inspection today at FederalRegister.gov and is scheduled for publication in the Federal Register on July 12, 2021. PBGC has included a 30-day public comment period in this rulemaking from the date of publication in the Federal Register. All interested parties may submit their comments, suggestions, and views on the rule’s provisions here: reg.comments@pbgc.gov or https://www.regulations.gov

Additional information, including Frequently Asked Questions, is available at PBGC.gov/arp

Author(s): PBGC press release

Publication Date: 9 July 2021

Publication Site: PBGC

PBGC Rules on Multiemployer Pension Bailout

Excerpt:

The Pension Benefit Guaranty Corporation (PBGC) today announced an interim final rule implementing a new Special Financial Assistance (SFA) Program for financially troubled multiemployer defined benefit pension plans.

Pertinent excerpts coming over the weekend but, for now, it looks like the bailout number moved from $86 billion to $94 billion per the PBGC press release:

Author(s): John Bury

Publication Date: 9 July 2021

Publication Site: burypensions

Update On The Multiemployer Pension Plan Bailout: New Regulations Finally Unveiled

Link: https://www.forbes.com/sites/ebauer/2021/07/11/update-on-the-multiemployer-pension-plan-bailout-new-regulations-finally-unveiled/?sh=29d66f215bb2

Excerpt:

The PBGC’s decisions here are not what organizations such as the NCCMP would have liked, although, clearly, it is the PBGC’s job to interpret the law, not to try to fix a poorly-written law.

At the same time, no multiemployer pension plan is worse off with this legislation than without it, even if it isn’t as generous as they would have liked. And nothing prohibits those plans from boosting contributions and using additional contributions to fund future accruals — which would mean that pension plans which express their contributions as fixed dollar amounts, rather than a percentage of pay, will be better positioned to provide for existing employees as well as retirees. What’s more, the calculation of future contributions is based on a one-time open group projection, without being revised from year to year, so that, in principle, if more workers join a plan, the plan will be better off. (Of course, if the projection is too optimistic about the number of future workers, the opposite will be true.)

But, of course, this is $86 billion that could have been spent for other needs, or not spent at all. And, however much advocates profess that they still hope for a more comprehensive revision of funding rules for multiemployer pensions, the poorly-conceived nature of this bailout makes it less, rather than more, likely that both sides of the aisle will come together to repair multiemployer pensions and prevent future bailouts.

Author(s): Elizabeth Bauer

Publication Date: 11 July 2021

Publication Site: Forbes

Editorial | When it comes to Illinois bond ratings, up definitely better than down

Link: https://www.news-gazette.com/opinion/editorials/editorial-when-it-comes-to-illinois-bond-ratings-up-definitely-better-than-down/article_d17d487c-5ff3-5da1-a958-60d7edd5c3e6.html

Excerpt:

Citing a “material improvement in state finances,” Moody’s Investor Services recently raised the state’s bond rating by one notch — up to Baa2 from Baa3.

Ordinary mortals won’t know what that means. But Illinois has climbed the ladder from being one notch above junk bond status to two notches.

It’s the first time Illinois’ bond rating has been raised in 20 years. The improvement comes after a steady spiral downward.

Author(s): Editorial Board

Publication Date: 4 July 2021

Publication Site: The News-Gazette

Most New Jerseyans Are Fiscal Dullards

Excerpt:

That is what the Murphy administration has to believe for them to send out this piece of gripka:

….

treating $10.19 billion in Biden relief money as if it will never have to be repaid (one way or another).

Keep in mind when reading just this one excerpt below that $6.9 billion represents about six months worth of payments out of a pension system that is still accruing benefits at record levels and as of June 30, 2020 reported unfunded liabilities under GASB of $128 billion.

Author(s): John Bury

Publication Date: 2 July 2021

Publication Site: Burypensions