This week, the Pension Benefit Guaranty Corporation announced its approval of another special financial assistance payment for a stressed union pension plan.
The latest plan to receive relief is the Gastronomical Workers Union Local 610 and Metropolitan Hotel Association Pension Fund, known as the GWU Local 610 Plan. Based in San Juan, Puerto Rico, the pension covers more than 2,600 participants in the hospitality industry.
The GWU Local 610 Plan became insolvent in June 2021. At that time, the PBGC started providing financial assistance to the plan. In a statement about the latest relief payment, Secretary of Labor Marty Walsh, who serves as the chair of the PBGC’s board of directors, said the new assistance will deliver the secure retirement the union’s workers were promised in return for many years of hard work.
As Walsh noted, the special financial assistance will enable the plan to pay retirement benefits without reduction for many years into the future. In all, the plan will receive $28.3 million in assistance, including interest to the expected date of payment to the plan.
In addition to the $28.3 million to be paid to the plan, the PBGC’s Multiemployer Insurance Program will receive some $2.8 million. This is equivalent to the amount of the GWU Local 610 Plan’s outstanding loans, including interest, for the previous financial assistance the PBGC provided beginning in June 2021.
The PBGC’s Special Financial Assistance program was enacted as part of the American Rescue Plan Act of 2021. The program provides funding to severely underfunded multiemployer pension plans, and it requires plans to demonstrate eligibility for relief and to calculate the amount of assistance pursuant to ARPA and PBGC regulations. As of August 30, the PBGC has approved over $7.5 billion to plans that cover over 152,000 workers, retirees and beneficiaries.
Under the program, the payments and earnings thereon must be segregated from other plan assets and may be used only to pay plan benefits and administrative expenses. Plans are not obligated to repay the relief to PBGC, but plans receiving SFA are also subject to certain terms, conditions and reporting requirements, including an annual statement documenting compliance with the terms and conditions.
The relief program operates under a recently updated final rule that became effective on August 8. Sources agree that the final updates made to the SFA program are helpful, but some are concerned about the expanded ability to invest relief funds in potentially volatile equities.