July 17, 2012 (PLANSPONSOR.com) - After a 2 1/2-year review, the Pension Benefit Guaranty Corporation (PBGC) has agreed to assume administration of the underfunded pension plan for the United Way for Southeastern Michigan and affiliates, according to Crain’s Detroit Business.
The PBGC started discussions in 2009 with the United Way and the 20 other nonprofits that belong to the program (see “Mich. Non-Profit Group Plan Possible Distress Termination Candidate”). According to financial data available at the time, the plan had a $22 million shortfall at end of 2006 and included numbers for non-profit employers that disaffiliated at the end of that year. However, the PBGC said the Employee Benefit Plan for United Way for Southeastern Michigan and Affiliated Agencies had assets of $29.8 million when it was terminated in 2010, and was underfunded by $23.6 million, Crain’s reports. The plan was frozen in 2005.
Moving the plan to the PBGC does not erase liabilities for the 18 non-profit employers that remained in the plan until its termination or for those employers that were in the plan for the five years prior to that termination, the agency said. There were at least 31 agencies in the plan during those five years, according to reports from Crain's. The PBGC is covering the plan's shortfall, but it will seek to recover that amount, collectively, from the employers that contributed to the plan within five years of its termination, the news report said. The United Way for Southeastern Michigan had the biggest individual liability with a shortfall of $4.16 million. The two employers with the next-largest liabilities were Detroit-based Catholic Social Services of Wayne County, with a shortfall of $2.23 million, and Adult Well Being Services in Detroit, with a shortfall of $1.15 million.
The agency also plans to seek termination premiums of $1,250 per participant from the employers, adding up to about $2 million for three years, which will help cover its costs to administer the plan. However, the agency said it often settles with employers based on their ability to pay.