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Aug. 5 — An Iron Workers local pension fund has withdrawn and resubmitted its application for benefit suspension approval from the Treasury Department, restarting the clock on the department’s review.
The Iron Workers Local 17 Pension Fund withdrew July 26 its petition under a 2014 law to suspend the accrued benefits of its multiemployer defined benefit plan participants, according to a notice appearing on the department’s website Aug. 4. The fund, based in Cleveland, made the petition in an attempt to avoid future insolvency.
The fund then resubmitted its application on July 29, making changes to the proposal tailored to recently issued Treasury guidance and designed to avoid the department’s objections when it denied in May a petition by the Central States, Southeast and Southwest Areas Pension Fund.
The Iron Workers fund filed its original petition with the Treasury on Dec. 23, 2015, becoming the second fund, after Central States, to file an application under the Multiemployer Pension Reform Act of 2014, also known as the Kline-Miller Act.
Teresa R. Pofok, counsel for the Iron Workers fund, told Bloomberg BNA Aug. 5 that the resubmitted petition takes into account the department’s final rules issued April 26 detailing benefit suspensions and the process for voting on proposed suspensions under the MPRA. The resubmitted petition also was altered in an attempt to avoid the faults the department identified in rejecting Central States’ application, she said.
Joellen Leavelle, communications and outreach director with the Pension Rights Center in Washington, told Bloomberg BNA in an Aug. 5 email that the resubmission “buys time for Local 17 retirees, who now have another opportunity to comment on the pension fund’s application to cut their pensions.”
The department rejected Central States’ petition after finding that its proposal didn't show that the fund would avoid projected insolvency. More specifically, Treasury found that the fund’s 7.5 percent annual investment return assumptions were unreasonable.
In addition, Treasury said that Central States failed to show that its proposed benefit cuts would be equitably distributed and that the fund didn't send out adequate notices about the cuts that were “understandable to the average plan participant.”
Pofok, attorney with Goldstein Gragel LLC, in Cleveland, said that the Iron Workers fund changed its investment return assumptions in response to the department’s denial of Central States’ petition.
The Iron Workers fund’s investment advisers and actuaries altered the original flat annual 6.5 percent investment return assumption, she said. In its place, they used year-by-year return assumption that began lower in early years and gradually increased in later years, she said.
This resulted in the fund’s insolvency being projected to 2024, one year earlier than under the original petition, Pofok said.
The fund also informed its participants of the cuts using the department’s model notice, she said.
Although the MPRA gives the Treasury 225 days in which to approve the petition, the pension fund needs to implement the benefit suspension by Feb. 1, 2017, or it would need additional benefit reductions for the suspension plan to work, Pofok said.
Pofok said she also believes that there will be a 30-day period for comments on the resubmitted petition beginning once the department publishes notice of the resubmission in the Federal Register.
Although the resubmission is positive news for the fund's participants, the “fact remains that until Congress finds a solution to this problem, retirees in `critical and declining' status multiemployer plans continue to be at risk of seeing dramatic cuts to their pensions--through no fault of their own,” PRC's Leavelle said.
In its annual Form 5500 report filed with the Department of Labor for its plan year ended April 30, 2014, the Iron Workers plan listed $85.7 million in assets and $223.2 million in liabilities. The plan listed 2,021 participants, of which 640 were active.
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