The Central States Pension Fund's application for suspension of benefits is available on the Treasury Department's website, the agency said.
The application by Central States, Southeast and Southwest Areas, Pension Fund features a number of documents, including the description of the proposed suspension, which would begin on July 1, 2016. The amount of a participant's suspension would be based on three factors—the “tier” the person's benefits are associated with; the amount of contributions made to the plan on the participant's behalf; and whether the person will be an active participant, terminated participant or retiree as of July 1, 2016—the application said.
“Participants with at least 20 years of Contributory Service Credit (and their beneficiaries in pay status) as of July 1, 2016, will receive lesser suspensions than other participants. Also, the suspensions are affected by both the age of the participant upon retirement and whether the participant elected a joint and survivor form of benefit upon retirement,” the application says.
On Oct. 22, Treasury issued a notice announcing that the fund's application had been submitted and published on Treasury's website. The notice also asked for comments, which are due 45 days after its publication in the Federal Register, which is scheduled for Oct. 23.
Central States submitted its application to Treasury on Sept. 25 and notified participants of its plan on Oct. 1.
The Central States rescue plan, as well as provisions in a 2014 law allowing the benefit suspensions, have drawn impassioned criticism that such cuts are unfair and deeply harmful to retirees who depend on the pension benefits
The Rescue Plan
According to the description of suspension—one of the 40 items on the application's checklist—the Multiemployer Pension Reform Act, also known as the Kline-Miller Act, established a three-tier system for benefit suspensions and set out different requirements for the benefits attributable to each tier.
Federal law requires that those benefits in Tier 1 be reduced “to the maximum extent possible,” the application said. Tier 1 comprises benefits attributable to employers that pulled out of the Central States fund on or before July 1, 2016, but didn't pay their full withdrawal liability under law or in accordance with the terms of the plan, the application said.
“Therefore the determination of the suspension amounts for benefits attributable to Tier 1 contributions does not include any formula developed by the Board of Trustees, but instead is generally equal to 110% of the benefit amount guaranteed by” the Pension Benefit Guaranty Corporation, the application said.
Benefits under Tier 2 and Tier 3 have more complex calculations. For those with at least 20 years of contributory service credits as of July 1, 2016, the reduction in benefits for Tier 2 won't be greater than 50 percent and reductions for those in Tier 3 won't be greater than 40 percent, the application said.
Excerpted from a story that ran in Pension & Benefits Daily (10/23/2015).
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