American Rescue Plan Act to Provide Special Financial Assistance for AFM-EP Fund

February 1, 2022

Ray Hair  -  AFM International President

Early last year, after an all-out lobbying effort by US labor unions, the Federation, and the AFM-EP Fund to mobilize rank-and-file union members and Fund participants, together with concerted action by a host of others, Congress passed and President Biden signed into law the American Rescue Plan Act of 2021 (ARPA). ARPA provides desperately needed relief to multiemployer defined benefit plans facing financial distress, like the AFM-EP Fund.

ARPA allows eligible multi-employer plans to obtain direct financial assistance from the federal government in the form of a grant that does not have to be repaid. The law appropriates assets from the general fund of the US Treasury to pay for the program.

The assistance is intended to provide pension plans with the funding they need to be able to pay benefits through 2051, with no reductions to participants’ benefits. In addition, plans that receive the assistance will not be eligible to reduce benefits under the Multiemployer Pension Reform Act (MPRA). At the same time, plans receiving financial assistance under ARPA cannot reduce employer contribution rates and cannot increase benefits unless the increase is fully paid for with new contributions (which is already the general rule for plans with the funding status of the AFM-EP Fund).

The Pension Benefit Guaranty Corporation (PBGC), which is the federal agency charged with the responsibility of overseeing pension plans, is administering the program. It is accepting program applications from plans seeking ARPA assistance in order of priority status established by the law. Because the AFM-EP Fund is not projected to be insolvent for many years, we are not in a priority group, although we expect to be permitted to file our program application about a year from now.

According to the law as adopted, there is no limit on the amount of money available to provide relief to eligible plans, so any delay should not adversely affect the Fund. Dozens of plans have already applied, and the PBGC has said that it is processing applications more quickly than anticipated.

We will not know how much financial assistance the AFM-EP Fund will receive until we prepare and submit our ARPA application. The amount of financial assistance is based on the plan’s financial status on the last day of the calendar quarter immediately preceding the application date. However, we anticipate a substantial amount of assistance that will protect the Fund from insolvency for years to come.

The PBGC issued interim regulations last summer regarding the application process and the amount of assistance that plans can receive. Numerous stakeholders submitted comments regarding the regulations, including the AFM-EP Fund. In general, we urged the PBGC to revise its methodology for calculating the amount of the financial assistance to increase the amount the Fund would receive. Among other points, we suggested that a broader range of investments be permitted for funds received from the program, which we believed would better fulfill the Congressional intent to save these plans.

The PBGC has said that it anticipates issuing final regulations soon (and may have done so by the time you read this). We hope the agency adopts at least some of the changes that we and others have proposed in order to ensure that ARPA assistance achieves the goal Congress intended—to bring financial stability to troubled pension plans that are so vitally important to so many people.

Not only does ARPA provide a lifeline for pension plans, it has also saved the PBGC itself, which was previously projected to run out of money in 2026 because of the imminent insolvency facing a few enormous plans. This would have been a disaster, because plans facing insolvency in the event PBGC went broke would have been left with almost none of the guaranteed benefit payments that the PBGC is supposed to provide. Now that these plans will receive financial assistance direct from the US Treasury under ARPA, PBGC’s balance sheet has been restored and it is projected to remain solvent for more than 30 years.

There are many large pension plans, like the AFM-EP Fund, as well as dozens of smaller ones that provide significant financial support to the communities they serve. The collapse of those plans would have caused great financial harm to those communities. All of your Trustees are grateful and proud of the grassroots political organizing and the determination of AFM-EP Fund participants and union members to push for the adoption of the American Rescue Plan Act, which now stands to improve the lives of tens of millions of workers and preserve the dignity of retirees.

Looking ahead in the new year, Fund Trustees are working together to develop informational, educational communications for participants, in order to promote better understanding of the Fund and the benefits available.

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102nd AFM Convention Rescheduled for 2023

Due to continuing pandemic uncertainty, COVID-related protocols and governmental restrictions, and challenges of COVID-related international travel, the AFM International Executive Board has determined that holding the 102nd Convention in June 2022 in Las Vegas is impossible and has rescheduled it for June 2023. Further details will be forthcoming.

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