By: Bradley Kafka
As we reported previously, the Bakery & Confectionery Union and Industry International Pension Fund (B&C Fund) has been underfunded for years, with actuaries estimating that the B&C Fund will become insolvent by January 2030.
To address this shortfall, the B&C Fund’s trustees invited contributing employers to a meeting in December 2017, during which the B&C Fund representatives advised employers that they had obtained approval to implement an alternative withdrawal liability rule consisting of a two pool allocation method, which we previously discussed here. The B&C Fund’s representatives further stated they would provide employers with “participation agreements,” which employers would be required to sign by February 15, 2018 to participate in the “hybrid pool.”
However, the participation agreements were not sent to employers until April 4, when the B&C Fund issued new details about the two pool plan, including an outline of payment terms for employers electing the new hybrid pool. At that time, the B & C Fund advised employers they were required to review and sign the participation agreements, referred to as the Withdrawal and Reentry Agreement, by September 15 if they wished to participate in the hybrid pool.
Employers that decide to participate in the hybrid pool would pay their withdrawal liability in the “old pool” based on a discounted formula. Specifically, employers could pay their existing withdrawal liability over 30 years or in a lump sum, and employers that elect to pay pursuant to the 30 year payment schedule could prepay their remaining withdrawal liability at a later date if they chose to do so.
Importantly, employers that participate in the new hybrid pool must remain contributing employers for 30 years. If a participating employer completely withdrew from the new hybrid pool prior to the end of the 30-year period, they would forfeit the discount they received for participating in the new pool. In addition, if an employer partially withdrew from the new hybrid pool, it would forfeit a percentage of its discount determined by the contribution base units that were eliminated by the partial withdrawal.
The terms for participating in the new hybrid pool are complex and the advantages and disadvantages of participation will vary from employer to employer. Employers considering participating in the new hybrid pool should seek guidance from attorneys and pension actuaries.
Stay tuned to Polsinelli at work blog, where we will provide you further updates on the new B&C two pool plan program as they become available.