PBGC bails out Freight Drivers Pension Plan, expected to run out of money in 2023
To date, the federal program, which provides funding to severely underfunded multiemployer pension plans, has approved over $7.7 billion to plans that cover over 154,000 workers, retirees, and beneficiaries.
In an effort to stave off reduced benefits to the Freight Drivers and Helpers Union No. 57 in Baltimore, the Pension Benefit Guaranty Corporation (PBGC) has approved an application to the Special Financial Assistance Program (SFA) allowing them to receive $192.8 million to assist payments with their underfunded pension plan. The Union plan was expected to run out of money in 2023.
“President Biden’s American Rescue Plan will deliver Special Financial Assistance to the Freight Drivers and Helpers Local Union No. 557 Pension Plan that ensures these 2,273 transportation industry workers and retirees covered by this plan will receive the retirement benefits they have earned,” said U.S. Secretary of Labor Marty Walsh, chair of the Pension Benefit Guaranty Corporation Board of Directors.
The SFA Program was enacted as part of the American Rescue Plan Act of 2021 (ARP). The program provides funding to severely underfunded multiemployer pension plans and will ensure that millions of America’s workers, retirees, and their families receive the pension benefits they earned through many years of hard work. To date, PBGC has approved over $7.7 billion to plans that cover over 154,000 workers, retirees, and beneficiaries.
The SFA Program give employers the opportunity to receive retirement plan assistance by demonstrating its eligibility under PBGC guidelines. SFA and earnings must be segregated from other plan assets and may be used only to pay plan benefits and administrative expenses. Employers who need and are eligible for assistance are not obligated to repay SFA to PBGC. Plans receiving SFA are also subject to certain terms, conditions and reporting requirements, including an annual statement documenting compliance with the terms and conditions. PBGC may conduct periodic audits of multiemployer plans that receive SFA to ensure all rules and regulations are being adhered to.
PBGC estimates that ARP will provide an estimated $94 billion in assistance to eligible plans that apply for SFA. SFA will not only protect the pension benefits of workers and retirees, but also will prevent the PBGC’s multiemployer insurance program from becoming insolvent in 2026, as previously projected.
The Department of Labor, in coordination with the Treasury Department, has the responsibility to ensure, following receipt of SFA, that insolvent plans reinstate suspended benefits going forward and pay participants an amount equal to previously suspended benefit payments (make-up payments).