PBGC Announces Settlement to Benefit Multiemployer Pension Plan

The agency says the agreement delays the plan’s insolvency date and reduces the expected burden on its multiemployer plan insurance program.

The Pension Benefit Guaranty Corporation (PBGC) has reached a settlement agreement with the Food Employers Labor Relations Association (FELRA), the United Food and Commercial Workers union (UFCW), and the FELRA/UFCW Pension Fund, a severely underfunded multiemployer plan that covers approximately 50,000 grocery and warehouse workers and retirees in the Washington, D.C., metropolitan area.

FELRA’s two primary contributing employers are Giant and Safeway supermarkets. PBGC says that in January 2013, Giant, Safeway and UFCW locals executed a series of actions that undermined the already financially troubled FELRA/UFCW plan. The bargaining parties froze benefits under the FELRA/UFCW plan and created a new multiemployer plan for future benefit accruals called the Mid-Atlantic UFCW and Participating Employers Pension Plan (MAP). “This weakened the FELRA/UFCW plan by diverting more than $100 million in contributions to MAP and accelerated the insolvency of the FELRA/UFCW plan. Absent this settlement, the FELRA/UFCW plan would have become insolvent in January 2021,” the agency says.

In addition, PBGC says the actions threatened to place additional burdens on its multiemployer program. The reduction in employer contributions increased the amount of financial assistance that the FELRA/UFCW plan would require from the program.

To address these concerns, the settlement agreement provides that MAP will combine with the FELRA/UFCW plan, which is expected to extend the plan’s solvency to mid-2022. Also, the FELRA/UFCW plan will be terminated by mass withdrawal, and Giant and Safeway will make withdrawal liability payments to the plan for 25 years, totaling about $56 million annually. In return, the supermarket chains will be released from further withdrawal liability to the FELRA/UFCW plan. The withdrawal liability payments are expected to reduce the amount of PBGC financial assistance that the FELRA/UFCW plan will require when it becomes insolvent.

PBGC’s Fiscal Year (FY) 2020 Annual Report shows the agency’s multiemployer insurance program will become insolvent sometime in FY 2026. In a message accompanying the FY 2020 Annual Report, PBGC Director Gordon Hartogensis said, “It remains clear that legislative reform is necessary to avert insolvency of the multiemployer program.”

Legislative attempts have been made over the past two years to address the multiemployer pension crisis, but they have been stalled, even as the COVID-19 pandemic is expected to make the situation worse for many multiemployer plans. In July, U.S. Senator Robert Portman, R-Ohio, issued an opinion piece calling on Congress to create a unified and bipartisan stance on the multiemployer pension crisis.