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Running On Fumes: The Road Carriers Local 707 Pension Fund

Of interest to this site is the Road Carriers Local 707 Pension Fund. The 5500 (an annual report by retirement plans) filing for the plan year ending August 31, 2014 indicated payments of $47,049,132 to retirees, with contributions of $6,089,047 (see here). The short plan year 5500 filing for September 1, 2014 – January 31, 2015 (see here) showed $21,910,307 going out to retirees and $2,490,662 paid in. As of January 31, 2016 the plan had projected assets of $24,485,449. Dear Reader, although the math is easy nothing else will be.

We will be paying close attention to the progress of this pension plan going forward. It appears the initial rubber stamps by the Treasury and the Pension Benefit Guarantee Corporation (PBGC) for failing plans is a rejection. Case in point: in response to an application to the Treasury for suspension of benefits by the plan Master, the Treasury explained in a letter (see here):

The Application includes cash flow projections intended to demonstrate that this statutory solvency requirement is satisfied. Those cash flow projections include financial assistance from PBGC based on the assumption that the Plan’s partition application, with which the suspension application is coordinated, would be approved.

On June 10, 2016, PBGC denied the application for partition. The failure to obtain a partition order is outcome determinative for the suspension application because Section 3.02 of the Application states that the Plan actuary’s certification that the Plan is projected to avoid insolvency as a result of the proposed suspensions “assumes the issuance of a partition order from the PBGC…” beginning July 1, 2016. Further the Plan stated in the Application that it will be insolvent by April, 2017 if the suspensions are implemented without the partition. Absent the assumed partition, the cash flow projections in the Application (updated to eliminate the assumed financial assistance from PBGC) demonstrate that the proposed suspension (without the partition) does not meet the statutory solvency requirement described above.

Based on the foregoing, Treasury has determined that the suspension of benefits is not reasonably estimated to achieve the level that is necessary to avoid insolvency and that the Application therefore fails to satisfy the requirements of Kline-Miller set forth in Code section 432(e)(9)(D)(iv). 

On one hand we certainly appreciate the Treasury protecting taxpayers from unnecessary waste. However, delay will not improve the obvious outcome. Surely the legal and other professional expenses resulting from numerous applications and rejections will significantly add to the costs of running the plan. Further, arriving at a solution with the financial markets at attractive levels would be easier than if the markets correct.

At this point, the Plan is dealing with politicians. Historically the only time the government moves quickly is when they have to. We will be watching this beast slowly die from a drawn out and painful form of malnutrition.

Please feel free to leave your opinions in the comment section below.

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