Detroit Carpenters’ Pension Plan Pension Recovery Program
Frequently Asked Questions
The Board of Trustees has prepared the following Frequently Asked Questions to answer your questions about the Pension Recovery Program. They are organized by subject.
We will add to this list when we have new information and as we receive more questions from you. We hope you find this helpful.
If you have other questions or want more information, please call the Pension Recovery Program Participant Support Line at (877) 631-MPRA (877-631-6772).
The Plan's History, Finances & Investments
The Detroit Carpenters Pension Plan has been certified as Critical and Declining. We received this certification because, based on reasonable assumptions, the Pension Plan will be insolvent in about 15 years and unable to pay benefits at that point. Because of this, the Trustees must look at every option available to preserve and protect the pensions of all participants.
There are three options available to the Trustees:
- The Trustees could do nothing. If the Trustees do nothing, the Plan will probably become insolvent and unable to pay benefits in about 15 years. If the Plan becomes insolvent, it will be taken over by the Pension Benefit Guaranty Corporation. Retirees could experience 95% cuts to their pensions, getting pennies on the dollar.
- The Trustees could wait for help from Congress in Washington, D.C. The Trustees could wait for help from Congress in Washington, D.C. Given the current tone of our federal government, it seems unlikely that we will get additional legislative relief in the near future. But if this option becomes viable in the future, we will do everything we can to utilize it.
- The Trustees can file for a limited reduction of benefits through the Multiemployer Pension Relief Act or MPRA. This means that we could put a plan together that reduces benefits to retirees and active workers while still preserving and protecting the plan for the future. The law requires that the cuts address shortfalls in the Plan's funding in a way that the federal government deems fair to participants.
Multiemployer Plans like ours rely on investments and contributions to pay for benefits. When the investment markets crash, like they did in 2000 and again in 2008, the Plan’s investments lose a lot of their value. Even though the markets eventually recover, it takes many years of very high investment returns to make up for the value lost in the crashes. As for contributions, the Plan needs to receive contributions for work hours from enough active employees to cover the benefits it will have to pay to retirees, future retirees and beneficiaries.
In addition to the investment markets crashes, there are other factors that caused the Plan to be where it is today, including:
- Unfortunately, a decline in membership has led to a decline in contributions to the Plan. Since 2005, our active population has decreased over 40%.
- Since 2009, retirees have outnumbered active participants. What’s more, retirees are living longer, resulting in larger total benefit payments that exceed the income the Plan gets from investments and contributions. This pattern has led to a decline in Plan assets.
- Shortsighted government regulations prevented the Plan from saving for a rainy day when we had the resources to do so.
- The stock market crash of 2000-2002 caused about a 10% drop in the Plan’s assets, and the 2008 crash—the worst since the Great Depression—resulted in a 26% loss in assets.
- Additionally, recent legislation—including right to work laws, the elimination of project labor agreements, and the repeal of prevailing wage laws—will negatively impact our work hours and our market share moving forward.
The Trustees rely on experienced investment professionals to provide expert advice and recommendations to the Pension Fund on where to invest the Plan’s assets. These professionals attend each Trustee meeting, report on the performance of each investment manager and provide the most-updated market information. Because the Plan is governed by ERISA (the Employee Retirement Income Security Act of 1974), the investments are required by law to be diversified. This means the Plan's money must be invested in a number of different types of investments and it cannot be overly concentrated in one investment area. The Plan invests in a mix of stock, bond and real estate funds that were recommended by the Plan’s investment professionals which satisfy these legal requirements.
The Trustees have been working to protect the Plan’s assets by taking actions available under the law for as long as the Plan has been around. Throughout its history, the Plan has been managed well under some very difficult circumstances. The economic crashes, and the depression from 2008 to 2015, were not foreseeable. The Trustees have taken necessary actions to keep the Plan on course based on historical factors and legal regulations. We increased contribution rates, and cut the benefit multiplier, as well as the credited portion of the pension contributions—the amount put toward your pension from the total employer contribution. We also implemented a Rehabilitation Plan as early as 2009, as required by law. Even though the Trustees have tried all available options to address these problems, our Plan is still seriously underfunded and the situation is becoming worse.
The United Brotherhood of Carpenters cannot contribute money to our pension. The law prohibits those kinds of transactions. However, the UBC has experts who can help us navigate the federal government divisions and other pension-related agencies like the Pension Benefit Guaranty Corporation (PBGC).
We cannot legally do this. Political funds, union general funds, and pension funds are all separate entities and there are laws that govern how each can be used. We cannot take money from politics and give it to the pension. And we cannot take pension money and spend it on union family events, for example. By law, all those entities must be kept separate.
No, we cannot. Similarly, these are separate funds, with different participants and they cannot mix.
Multiemployer Pension Reform Act (MPRA)
MPRA became law in December 2014. MPRA allows trustees of severely underfunded multiemployer pension plans to develop strategies—like our Pension Recovery Program—that include benefit reductions for both active workers and retirees, in order to save the plans from becoming insolvent and enable them to regain their health so they can continue paying benefits in the future. Pension plans across the nation are submitting applications under MPRA. This helps us avoid going to the PBGC (Pension Benefit Guaranty Corporation), which would reduce benefits even further, if the PBGC imposed its cuts under current law. In our opinion, this is the only viable legislative option, but the application process is extensive and will take time.
MPRA would allow us to “suspend” or reduce previously untouchable benefits to help balance and stabilize our Plan for the long-term. All of these cuts must be pre-approved by the government, and we will keep all our members in the loop every step of the way. Anyone over age 75 have certain protections on their benefits. In fact, those over age 80 and disabled participants cannot have their benefits reduced at all! And we cannot reduce benefits more than what is necessary to avoid insolvency, meaning we won’t be able to immediately fix the plan, but can make adjustments for long-term stability.
There are a number of pension plans around the country that have become stable through MPRA.
Under MPRA, the Plan generally must meet the following criteria:
- The pension plan must be certified to be in Critical and Declining Status by the plan’s actuary. The Plan’s actuary certified that this Plan is in Critical and Declining status starting in fiscal year 2018. This means that the Plan is projected to run out of available resources in about 15 years if the Pension Recovery Program is not implemented.
- In addition to meeting several criteria related to age and disability status, the proposed benefit reductions must be enough to avoid insolvency and deemed fair by the federal government.
We filed for MPRA relief in September 2019 and had several positive conversations with the federal government after our filing. However, without any notice, the federal government contacted us on April 1, 2020, and said they had “grave concerns” about our MPRA application. We reviewed our data with the Department of Treasury. We answered their questions and reviewed the history of our Plan. Three weeks later, the Department of Treasury told us that if we didn’t withdraw our application, they would make a staff level recommendation to the Secretary of Treasury to deny our application.
According to the Department of Treasury, they would recommend a denial of the first application based on three factors:
- They questioned the fairness of the proposed differences in reductions to vested deferreds compared to actives or current retirees.
- They questioned our projected man-hours assumptions. In essence, they pointed out that it was unlikely we would achieve our first year of assumption.
- They questioned our rates of return in relation to our funding level. This means that our cuts weren’t deep enough.
The Board of Trustees submitted the Pension Recovery Program for approval to the U.S. Department of the Treasury (IRS) and other government agencies on September 29, 2020. The Treasury Department must approve or reject the application within 225 days after the application is filed (by around May 7, 2021). If the Treasury Department approves the application, Plan participants will have an opportunity to vote on whether to approve or reject the Pension Recovery Program. If the Plan’s participants vote to accept the Pension Recovery Program, it will go into effect on July 1, 2021.�
The U.S. Department of the Treasury and the Department of Labor, together with the Pension Benefit Guaranty Corporation (PBGC) all oversee the Pension Plan. If a plan becomes insolvent, the PBGC takes over funding its benefits, but at a substantially reduced rate. MPRA designates the U.S. Department of the Treasury as the sole authority to review and approve or deny all multiemployer pension plan applications to reduce benefits, with the assistance of the other agencies.
Yes. MPRA requires that participants’ benefits not be reduced to less than 110 percent of the amount guaranteed by the PBGC. The current maximum PBGC guaranteed benefit is $35.75 per year of service. For example, for a participant who has 30 years of service, the maximum benefit guaranteed by the PBGC would be $12,870 per year. Of course, lower PBGC guaranty levels apply to participants with less service or lower current benefit levels. MPRA does not place a specific limit on the percentage of a participant’s benefit that may be reduced.
MPRA amends portions of ERISA and the Internal Revenue Code and includes, for the first time, rules for reducing previously protected, accrued benefits, including retiree benefits, in order to save a pension plan from insolvency.
Our Proposed Pension Recovery Program
A benefit reduction is a decrease of current or future payments from the Plan to any participant or beneficiary. The law calls them “suspensions” because those reductions could possibly be restored in the future if the Plan is considered healthy enough under the law to do so. In order for reductions (or suspensions) to take place, the Plan has to submit an application (our Pension Recovery Program) showing that the proposed pension benefit reductions meet the requirements of MPRA, including showing that the reductions are necessary and sufficient to keep the Plan from running out of money in the long run. Additionally, the Plan must show that the proposed benefit reductions do not exceed the amount necessary to keep the Plan solvent.
We submitted our Pension Recovery Program on September 30, 2020. The Treasury Department will review our submitted Pension Recovery Program and must provide a response within 225 days from when we submitted our Pension Recovery Program for review (around May 7, 2021). If the Treasury Department approves the Pension Recovery Program, you will then have the opportunity to vote on whether the Pension Recovery Program should be implemented. MPRA requires that the voting process be conducted by an independent party and will generally be completed within 30 days of IRS approval. If you vote to accept the Pension Recovery Program, it will go into effect on July 1, 2021.
The government agencies having oversight over the Plan can still implement the Pension Recovery Program if they deem it necessary to save the Plan.
If the Pension Recovery Program is approved, it is scheduled to go into effect on July 1, 2021.
MPRA requires that all benefit reductions be fair, but not necessarily equal. Up until this point, active members have borne the brunt of most cuts to their benefit accruals in both a reduced benefit multiplier (1%) and in the reduction in the credited portion of their pension contributions (currently 39% of contributions is credited). To spread out the impact of the reductions, the Pension Recovery Program will cut benefits accrued prior to 2007 (before the 1% multiplier went into effect) of retirees currently receiving a benefit, actives who will receive a benefit in the future, as well as those who are vested deferred (had a break in service). Benefits accrued after 2007 (at the 1% multiplier), disabled participants and retirees over age 80 that are currently receiving benefits will not be cut. Because of the way the law works, the percentage of benefits to be reduced will differ based on various factors, including the participant’s age at the time of the reduction.
Over the last several years, we have considered many different options to try and save the Plan. We determined that the Pension Recovery Program provides the best opportunity for long-term health of the Plan and future benefits for all of our participants and is fair in its impact on the various groups of participants. However, we must also work to elect people who support our union and our pension.
The Plan has repeatedly cut back the future benefits to be received by the members who were active at that time, up to limits permitted by laws in existence before MPRA. We have also increased the contribution rates that employers pay into the Plan. Continuing to cut future benefits and raise contribution rates will not save this Plan—it only makes it harder to get new participants and contributing employers to join the Plan. MPRA allows us to spread the changes across retirees and actives so that we all share in the effort to preserve our Pension Plan.
Today, the Plan is paying out almost $40 Million more in retiree benefits a year than it is receiving in employer contributions. That deficit will continue to grow if we don’t take immediate action to fix the problem. The longer we wait, the bigger the benefit reductions will need to be to save the Plan. If the Trustees wait much longer, it will be too late to keep the Plan from becoming insolvent. If that happens, your benefit would be reduced to the amount guaranteed by the PBGC, which is substantially less than the amount you would receive after the MPRA reduction. And, if the PBGC itself also runs out of money, which is very possible, our benefit could be reduced to almost nothing.
The law does not permit the benefit reductions to be spread out. Also, the longer we wait to act, the larger the reductions will need to be to save our pensions. In fact, if we delay reductions much longer, we may not be able to prevent the Plan from becoming insolvent.
No, the law specifically requires that the reductions have to be enough to keep the Plan solvent. Lesser reductions would not be expected to keep the Plan solvent or receive government approval.
No. The law does not permit lump sum benefit payments, nor does it allow the Plan’s assets to be divided up that way. Also, due to the Plan’s deficit, we would not have enough money to provide lump sum payments to every participant, even if it was permitted.
The Pension Recovery Program takes into account the expected decline in active participants. The Pension Recovery Program is based on many assumptions including hours worked and expected investment returns. These assumptions were selected based on the Plan’s recent experience, expected market conditions and input from numerous sources. MPRA requires that benefit reduction plans must be projected to allow the Plan to continue to be able to pay pensions indefinitely. The Plan’s actuary must certify—and the U.S. Department of the Treasury must agree—that the benefit reduction plan is sustainable before it can be approved and implemented.
We designed the Pension Recovery Program to be a one-time fix for our Plan. However, we cannot offer such a guarantee because the Plan is still subject to a variety of external factors that are completely outside our control and which change over time, such as the state of the economy, government regulations, and investment returns. The Trustees took these factors into account as we developed the proposed Pension Recovery Program, but we cannot guarantee that the reasonable assumptions we make now will not be affected by those future events.
Yes. The benefit reductions can be restored (either partially or fully) once the Plan’s overall funding improves to a level where the law allows such restorations. In order for this to happen, hours worked need to increase and, of course, the funding deficit has to be eliminated.
What Does this Mean for Me?
All plan participants should have received information about the proposed reduction in benefits in the notice that was sent to you on or about October 2, 2020. If you have questions about your benefits, please call the Pension Recovery Program Participant Support Line at (877) 631-MPRA (877-631-6772).
If your benefit is reduced by the Pension Recovery Program, your spousal survivor benefit will also be reduced proportionally (unless otherwise protected, as noted earlier).
Yes, but it will depend on how the QDRO is structured. If you have questions about your Qualified Domestic Relations Order, please call the Plan Benefit Office at (800) 572-2525.
Yes, they are. Plan Trustees and Local Union Officers who are participants in the Plan are treated like any other individuals who are participants in this Pension Plan. Everyone is subject to the same rules for benefit reductions under the proposed Pension Recovery Program.
Nothing. Under MPRA, participants receiving a disability benefit are protected from reductions under a Pension Recovery Program. However, if our Pension Recovery Program is rejected, the Plan becomes insolvent and the PBGC takes it over, all Plan participants including you will face pension cuts regardless of age or disability status—and the cuts will be larger than those proposed under our Pension Recovery Program. If you converted from a disability to a regular pension (early or normal) the disability component of your benefit is still fully protected and not subject to a MPRA cut.
Over the last decade, active employees have seen their accrual rates and percent credited on pension contributions reduced. The Pension Recovery Program should be the last cut that they will face for the foreseeable future. Again, the part of their benefit based on a 1% multiplier will not be cut.
These rules are set by law. According to MPRA, retirees over age 80 on the date that the proposed Pension Recovery Program goes into effect (July 1, 2021) are not subject to cuts. Retirees between 75 and 80 are subject to a sliding scale of reductions based on their age at the time the MPRA reductions take effect. However, if our Pension Recovery Program is rejected, the Plan becomes insolvent and the PBGC takes it over, all Plan participants will face pension cuts regardless of age or disability status—and the cuts will be larger than those proposed under our Pension Recovery Program.
While you are exempt from the reductions under our Pension Recovery Program, you are not exempt from cuts that would be imposed by the PBGC, if the Plan became insolvent. If our Pension Recovery Program is not approved and the Pension Plan becomes insolvent, the PBGC will cut everyone’s pensions across the board—including yours, since the MPRA limits on benefit cuts would not apply then. That is why the cuts will be much larger than the reductions called for by our Pension Recovery Program and the cuts will hit everyone regardless of age or disability status. Further, if the PBGC itself becomes insolvent, our pension could be reduced to almost nothing.
No. The age protections are based on your age on the date that the reductions become effective—they do not change with age. If you are 75 or older on the date when they take effect, the age protections will apply to you. Otherwise, they will not. Your reduction at that time will remain at that rate for as long as you continue collecting a pension, per the rules established under MPRA.
You should receive a personalized benefit estimate at your home address. They will be mailed to you in the beginning of October 2020. Contact the Plan Benefit Office at (800) 572-2525 if you do not receive your estimate or if you believe the information included on your estimate is incorrect.
Yes, your benefits will be cut under the Pension Recovery Program. You should receive a personalized benefit estimate at your home address after October 1, 2020. Contact the Plan Benefit Office at (800) 572-2525 if you do not receive your estimate or if you believe the information included on your estimate is incorrect.
Please contact the Plan Benefit Office by using the contact information at the bottom of your statement to review your calculation.
Pension Recovery Program Application and Voting Process
Yes, you do. Before the MPRA Pension Recovery Program can be implemented, participants must first vote on the proposed Program. Also, a retiree representative is required to participate in the process by law.
All Plan participants can vote on the Pension Recovery Program once it is approved by the Treasury Department. Plan participants are active members, retirees, terminated vested participants and surviving beneficiaries.
If the Treasury Department rejects the Pension Recovery Program, there will be no vote and the Pension Recovery Program will not go into effect. At that point, the Board of Trustees has two options for the Pension Plan. Either our Pension Plan will go insolvent and be turned over to the PBGC in the next 15 years, or our Pension Recovery Program can be amended and re-submitted to the Treasury Department. Under both options, the cuts would likely be larger than those proposed in our current Pension Recovery Program.
The Treasury Department has sole responsibility for the voting process. The 21-day voting period must take place within 30 days of approval of the Pension Recovery Program, according to MPRA. That means the election could be held in May or June of 2021, depending on how long the Treasury Department takes to approve our application. The election will be held through a ballot process and will be conducted by a Treasury Department-selected third-party administrator. All Plan participants can vote on the Pension Recovery Program, including active members, retirees, terminated vested participants and surviving beneficiaries.
MPRA requires that our Pension Recovery Program be approved by the Treasury Department before it goes to a vote. Then the Pension Recovery Program must be voted on by Plan participants.
Pension Benefit Guarantee Corporation (PBGC)
The PBGC is a federal agency that was created to ensure pensions and cover payments in the event that a pension plan runs out of money—similar to the way that the FDIC insured bank deposits. When the PBGC takes over a pension plan, payments are automatically cut to levels mandated by law, as discussed earlier. With many pension plans currently in trouble and projected to become insolvent, the PBGC itself is projected to become insolvent by 2025—before our Plan is projected to run out money. If that happens, pension benefits for plans taken over by the PBGC would be reduced to almost nothing.
No, the PBGC will not make up for any of the benefit reductions under current law. The PBGC only gets involved if the Plan becomes insolvent in the near future.
The Trustees will comply with any future laws and regulations that govern our Plan, and we will review any future legislation that could potentially address the Plan’s solvency problems. In the meantime, we cannot wait for Congress to act. If we do not address our Plan’s issues now, the Plan will become insolvent in the near future.
If you have elected a fixed dollar amount of withholding from your monthly pension benefit payment, you may want to consider reducing the amount withheld for taxes. If you have taxes withheld as a percentage or based on normal withholding, once the benefit is reduced, the amount of taxes withheld will be reduced automatically.
The Pension Recovery Program only affects pension benefits. The Pension Recovery Program does not impact the health plan or any other aspect of your benefits (such as the Annuity Fund). If you have your healthcare self-pay premiums automatically deducted from your pension, you may want to evaluate that option, in the same way that you should review your tax withholdings.
On October 30, 2018, the Trustees voted to temporarily waive the Suspension of Benefits Rule, effective November 1, 2018, which was further modified recently. This allows retirees to work with their tools and collect their pension check. However, working retirees will not be credited for these additional pension contributions and his or her pension will not be recalculated. The Chairman and Secretary of the Pension Plan were given the authority to reinstate the Suspension of Benefits Rule, if necessary, to meet industry conditions.
We are devoting resources to helping you understand this process.
- Pension Recovery Program Participant Support Line: (877) 631-MPRA (877-631-6772)
- Tele-Town Hall Meeting: In order to communicate with participants safely, we are holding several Tele-Town Hall meetings in October to explain our plan and answer your questions. You may join any meeting that fits your schedule. You can join another Local Union meeting if that is more convenient. To join the Tele-Town Hall, answer the phone when it rings or call 800-460-1205. The schedule for the meetings is below.
- All Participants: Sunday, October 4 at 7 pm
- All Apprentices: Tuesday, October 6 at 7 pm
- Local 1045: Sunday, October 11 at 7 pm
- All Retirees: Wednesday, October 14 at 11 am
- Local 687: Sunday, October 18 at 7 pm
- Local 1234: Thursday, October 22 at 7 pm
- Local 1102: Sunday, October 25 at 7 pm
- Retiree Representative: Chuck Tindall, c/o Carpenters Pension Trust Fund, Detroit & Vicinity, 700 Tower Drive, Suite 300, Troy, MI 48098, (313) 570-1447, Retiree.Rep@gmail.com