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An automotive industry pension plan is the latest to have its petition to cut benefits denied by the Treasury Department.
The decision brings to five the number of multiemployer plans that have had their petitions to cut benefits rejected. Only one multiemployer plan’s application has been approved.
The department, in a letter dated May 9, notified the board of trustees of the Alameda, Calif.-based Automotive Industries Pension Fund that its request to cut the benefits of its participants to stave off the fund’s insolvency had been rejected.
The plan filed its petition in September 2016, months after Treasury denied a rescue petition submitted by the 400,000-member Central States, Southeast and Southwest Areas Pension Fund but before the department rejected three other plan applications. Some industry observers thought that plans filing after Treasury’s rejection of these plans would learn lessons from those rejections and be better able to craft successful petitions.
“The decision demonstrates that, even with the change in administration, Treasury remains focused on evaluating the reasonability of each actuarial assumption against the standards outlined in the preamble and text of the final regulations,” Dominic DeMatties, a partner with Alston & Bird, told Bloomberg BNA in an email. He was referring to final rules issued under the Multiemployer Pension Reform Act of 2014, which allowed for the filing of benefit cut petitions.
It appears that the Automotive Industry fund’s trustees weren’t able to benefit from the Treasury’s rejection of Central States’ application.
The Central States decision may have been read by some as focusing on “assumptions that affect cash flow in the near term, such as the investment return assumption, DeMatties said. That assumption wasn’t “a basis for rejection in this case,” said DeMatties, who previously served as an attorney-adviser in Treasury’s Office of the Benefits Tax Counsel.
As all but one of the plans applying to Treasury to cut benefits have thus far been rebuffed, those who originally supported the MPRA, also know as the Kline-Miller Act, have expressed concern about the law’s process at Treasury.
Treasury’s latest ruling “will lead to even larger benefit reductions” for the plan’s participants when the plan goes insolvent, Michael Scott, executive director of the National Coordinating Committee for Multiemployer Plans, told Bloomberg BNA.
Treasury continues to review applications in a way that’s “inconsistent with the intent and purpose of the MPRA legislation,” Scott said. This means that technical corrections to MPRA are required to ensure that the law is a “viable tool for trustees to protect the maximum pension benefits of plan participants,” he said.
The NCCMP, a coalition of employers and unions, lobbied for passage of the MPRA.
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Treasury's rejection letter is at https://www.treasury.gov/services/Responses2/Automotive%20Industries%20Notification%20Letter.pdf.
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