Western States Office &
Professional Employees
Pension Fund

FAQs

This section includes answers to frequently asked questions about the Pension Benefit Reduction and Recovery Plan. Touch or click the arrow symbol next to each question to show its answer. Note, you can also find copies of previously issued FAQs, which provide details on the Plan’s funded status and Rehabilitation Plan, on the Plan’s website at www.wsp.aibpa.com.

We will add to this list as we receive more questions from participants through our town hall sessions, in-person meetings, and our dedicated call center.

The Plan’s History, Finances, and Investments

A number of factors contributed to the Plan's dire financial situation, including a higher-than-expected number of retirements, declining active membership (employers and active employees), and the stock market crash of 2008. Check here for more details.

As required by law, the Board adopted a Rehabilitation Plan in late 2009, which became effective on January 1, 2010. It reduced the accrual rate, increased the normal retirement age to 65, eliminated early retirement benefits, and required supplemental employer contributions that would grow to 338% of the pre-Rehabilitation Plan contribution rate.

However, these changes were not enough to shore up the Plan and the Board updated the Rehabilitation Plan in 2011, and again in 2013, but due to investment declines in 2014 and 2015, along with dwindling membership, the funding shortage became worse.

At this stage, all reasonable measures to forestall insolvency have been taken, and for 2016, the Plan was certified in “critical and declining status” with the U.S. Department of Labor, which means it is not expected to recover and is projected to run out money during 2035.

The actions of all parties responsible for the Plan’s investments are reviewed on a regular basis by outside auditors. The U.S. Treasury Department and the Pension Benefits Guaranty Corporation also oversee the Plan. Further, the Plan is required to file yearly statements (Form 5500) by the U.S. Department of Labor (DOL) and is subject to independent DOL audits.

Multiemployer Pension Reform Act of 2014 (MPRA)

MPRA became law in December 2014. It allows severely underfunded multiemployer pension plans like ours to develop Pension Benefit Reduction and Recovery Plans designed to preserve the plans and enable them to continue paying benefits to participants in the future. A Pension Benefit Reduction and Recovery Plan typically includes benefit reductions for most participants--although special protections apply for participants between the ages of 75 and 80 and for disabled pensioners.

MPRA generally requires that:

  1. The pension plan must be certified to be in “critical and declining” status by the Plan’s actuary; and
  2. The proposed benefit reductions must be enough to avoid insolvency; the law prevents plans from cutting too little or too much.

Our Pension Plan’s actuary has certified that the Plan was in critical and declining status starting in 2016, and has projected that the Plan will run out of money during 2035, if the proposed Pension Benefit Reduction and Recovery Plan is not implemented.

After the Board develops the Pension Benefit Reduction and Recovery Plan, an application and the Pension Benefit Reduction and Recovery Plan are submitted to the U.S. Treasury Department. Our Pension Plan submitted its application on February 15, 2017; it was accepted for review by Treasury on February 22, 2017.  

Treasury has up to 225 days to review the Pension Benefit Reduction and Recovery Plan and approve or reject it. If the recovery plan is approved, Plan participants then have the opportunity to vote on whether to approve or reject it.

  • If participants vote to accept the Pension Benefit Reduction and Recovery Plan, it will go into effect as soon as administratively feasible after the vote.
  • If participants vote to reject the Pension Benefit Reduction and Recovery Plan, it will not go into effect, and the Board may choose to rework the application and resubmit it with Treasury. Larger benefit cuts will likely be required under this scenario.

The U.S. Treasury Department and the Department of Labor together oversee the Pension Benefit Guaranty Corporation (PBGC). Congress appointed the U.S. Treasury Department to review all multiemployer pension fund recovery plans developed under MPRA because of the high probability that the failure of multiemployer pensions funds would wipe out the PBGC.

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.

Our Proposed Pension Benefit Reduction and Recovery Plan

The Board adopted a position of fairness in deciding on the reduction amount—29% for active participants, terminated vested participants, and retirees age 75 and under. This amount is sufficient to improve the Plan’s financial position, avoid insolvency, and continue to pay the best benefits to all participants. It also complies with MPRA limits and exemptions for those age 80 and older, those between ages 75 to 80, and those receiving a disability benefit under the Plan. Also, note that your benefit reduction cannot be lower than 110% of the benefit amount guaranteed by the PBGC.

Today, the Plan is paying out significantly more in retiree benefits each year than it is receiving in employer contributions and investment returns. That deficit will continue to grow if we don’t take immediate action. The longer we delay, the larger the benefit reductions will need to be to preserve the Plan. And, if we wait until just before the Plan becomes insolvent, it will be too late—your benefit will be reduced to the amount guaranteed by the PBGC based on your years of service. And if the PBGC runs out of money, your benefit could be reduced even further.

No. The longer we wait to act, the larger the reductions will need to be to preserve the Plan and your pension.

No. Due to the Plan’s funding status, we do not have enough money to provide lump sum payments to every participant. In addition, because the Plan is in “critical and declining” status, by law we are not allowed to provide participants with lump sum payouts.

A decline in the active participant count was built into the Pension Benefit Reduction and Recovery Plan’s projections. MPRA requires that Pension Benefit Reduction and Recovery Plans must be projected to allow the Plan to pay pensions indefinitely. An independent actuary must certify—and the U.S. Treasury Department must agree—that the Pension Benefit Reduction and Recovery Plan is sustainable before it can be approved and implemented. Once our proposed Pension Benefit Reduction and Recovery Plan is implemented, the Plan’s deficit will begin to decrease, which will eventually allow the Plan to stabilize.

While MPRA forces the Plan to assume that membership and contributions will continue to decrease in the coming years, we continue to work toward increasing membership. If that happens, the Plan’s financial outlook may improve. 

Yes. All trustees and local union officers who participate in this Pension Plan will be subject to the same benefit reductions under the proposed Pension Benefit Reduction and Recovery Plan. The Pension Plan has no employees.

Over the last decade, you have seen your accrual rate reduced and faced other benefit changes. The Pension Benefit Reduction and Recovery Plan should put an end to that. Some of your benefit will be reduced under the Pension Benefit Reduction and Recovery Plan, but―while there are no guarantees―it should be the last cut you face for the foreseeable future.

Also, the Pension Benefit Reduction and Recovery Plan includes a proposal to slightly increase the accrual rate for active participants to 1.0%, from .75% of contributions, because:

  • Active participant accrual rates have decreased significantly over the past several years in order help improve the Plan’s funding.
  • The increase will help level the burden of improving the Plans’ funding between actives and retirees.
  • The increase may help recruit new participants.

You will receive a personalized benefit estimate at your home address after February 15, 2017. Contact BeneSys (the Plan's Administrator) if you do not receive your estimate or if you believe the information included on your estimate is incorrect.

Please contact BeneSys (the Plan's Administrator) if you believe the information used to calculate your benefit estimate (e.g., your years of credited service) is inaccurate. By law, appeals related to the Pension Benefit Reduction and Recovery Plan cannot be filed or considered until after the U.S. Treasury Department approves our application.

The rules are set by law. According to MPRA, retirees age 80 and older on the Pension Benefit Reduction and Recovery Plan effective date and those receiving a disability pension are exempt from reductions. Retirees between ages 75 to 80 are subject to a sliding scale of reductions, based on their age on the Pension Benefit Reduction and Recovery Plan effective date. If this applies to you, your pension will remain at that rate for as long as you continue receiving it.

If you are receiving a disability pension on the Pension Benefit Reduction and Recovery Plan effective date, nothing will happen to your pension. MPRA protects participants receiving a disability benefit from reductions under a Pension Benefit Reduction and Recovery Plan. However, if our Pension Benefit Reduction and Recovery Plan is rejected, the Plan becomes insolvent, and the PBGC begins providing financial assistance to pay benefits, all Plan participants will face pension cuts regardless of age or disability status—and, for most, the cuts will be larger than those proposed under our Pension Benefit Reduction and Recovery Plan.

While you are exempt from the cuts under our Pension Benefit Reduction and Recovery Plan, you are not exempt from cuts imposed by the PBGC. If our Pension Benefit Reduction and Recovery Plan is not approved and the Pension Plan becomes insolvent, the PBGC will provide the Plan with financial assistance for paying benefits. Everyone’s pensions will be reduced across the board—including yours. What’s more, for most participants, the cuts will be much larger than those called for by our Pension Benefit Reduction and Recovery Plan. They will hit everyone regardless of age or disability status. Also, if the PBGC itself becomes insolvent, your pension could be reduced even further.

We designed the Pension Benefit Reduction and Recovery Plan to fix our Plan’s current situation. However, we cannot guarantee that further changes will not be required in the future. The Plan remains subject to a variety of external factors that are completely outside our control and change over time, such as the state of the economy, government regulation, investment returns, and retirement rates. The Board took these factors into account while developing the proposed Pension Benefit Reduction and Recovery Plan, but, again, we cannot guarantee that the reasonable assumptions made now will not be impacted by future events.

So far, the Plan has not experienced a mass withdrawal, even though a large number of employers withdrew between 2008 to 2016. When an employer exits, it must continue to pay its withdrawal liability—equal to the employer’s share of the Plan’s unfunded liability—while its employees stop accruing Plan benefits. Currently, employer withdrawal liability payments are capped at 20 years.

A “mass withdrawal” occurs when all, or substantially all, employers withdraw from the Plan. If this happens:

  • Employer withdrawal liability payments are re-determined under PBGC-mandated rules, including a “no de minimis” exception and no 20-year payment cap
  • These rules apply to all employers who exit during the mass withdrawal year, as well as to all employers that withdrew in the prior three years
  • A mass withdrawal would likely accelerate the date of insolvency
  • Any ability of the Board to implement a Pension Benefit Reduction and Recovery Plan is effectively taken away

For these reasons, the Board believes it is not in employers' best interests to stage a mass withdrawal from the Plan.

Pension Benefit Reduction and Recovery Plan Application and Voting Process

All Pension Plan participants will have the opportunity to vote on the Pension Benefit Reduction and Recovery Plan if it is approved by the U.S. Treasury Department. This includes active employees, retirees, terminated vested participants, and surviving beneficiaries.

If the U.S. Treasury Department denies the Pension Benefit Reduction and Recovery Plan it does not mean that the Pension Plan can simply continue the way it is today. It is projected to become insolvent during 2035.

With this in mind, the Board may choose to rework the Pension Benefit Reduction and Recovery Plan and reapply with Treasury—and larger benefit reductions will most likely be required.

And remember, if the Plan becomes insolvent, the PBGC will provide financial assistance to the Plan and benefits will be reduced to PBGC guarantee levels. This would result in larger benefit reductions than are being proposed by the Pension Benefit Reduction and Recovery Plan.

Also, if the PBGC runs out of money, which is projected to happen within 10 years, your PBGC benefit will be reduced to almost nothing.

The U.S. Treasury Department has sole responsibility for the voting process. The vote must occur within 30 days of Treasury approval of the Pension Benefit Reduction and Recovery Plan, and the voting period runs for 21 days. The vote will be conducted by an independent party, likely using online and phone voting options.

We will provide more details on the timing and process for the vote if the Pension Benefit Reduction and Recovery Plan is approved by Treasury.

It's the law. MPRA requires that our Pension Benefit Reduction and Recovery Plan be first approved by the U.S. Treasury Department. Then the plan must be voted on by Plan participants before it can be implemented.

The PBGC is a federal agency that was created to insure pensions and provide financial assistance with payments if a pension plan runs out of money. When the PBGC assists with pension payments, benefits are automatically cut. With many pension plans currently in trouble and projected to become insolvent, the PBGC itself may run out of money within 10 years. If that happens, pension benefits for plans administered by the PBGC may be reduced to almost nothing.