MPRA – FAQs

The Plan’s financial difficulties have primarily been caused by the following factors:

• Loss of contributing employers – The recessions in 2001 and 2008 resulted in the closure of many local automotive dealerships and automotive parts retail shops who were contributing employers to the Plan. This loss of contributing employers led to a decline of the working participant population of 53% over the last 15 years, and an accompanying loss of contributions paid into the Plan. Due to this decline in working participants and the related contribution income, benefit payments to retirees greatly exceed the amount paid into the Plan. Currently, almost $6 goes out to pay benefits to participants for every $1 it receives in contributions.
• Investments – Plan’s investments have not recovered from the market declines of 2000‐ 2002 and the market crash of 2008. The Plan lost 28% of its investment value in the 2008 market crash alone. While Plan investments have performed well in recent years on a percentage basis, those gains were made on a smaller amount of assets and have been insufficient to undo the significant losses since 2000.

The Board of Trustees has taken a number of steps allowed by the PPA to strengthen the Plan’s financial situation, including:

• Reductions in benefit accrual rate – The Trustees implemented reductions in the benefit accrual rate in 2003, 2005 and 2008.
• Eliminating additional benefits – Under the 2008 Rehabilitation Plan, additional benefits were eliminated, such as subsidized early retirement benefits, disability retirements and the 36 month pre‐retirement death benefit.
• Supplemental contributions on employers – The 2012 update to the Rehabilitation Plan imposed a supplemental contribution on employers, which does not grant additional benefits but instead helps strengthen the Plan’s funding status.

These actions helped, but were unable to completely restore the Plan’s financial situation. Despite these measures, the Plan is currently scheduled to become insolvent, or run out of money to pay benefits, in 2030.

The Board considered other options, such as Pension Benefit Guaranty Corporation (“PBGC”) assistance for Plan Partitions and merging with other pension plans. Unfortunately, the PBGC assistance would have been insufficient to solve the problem, and the Board was unable to locate another pension plan willing to merge with the Plan in its current state.

Reducing the Plan’s administrative expenses would not remedy the Plan’s financial difficulties either. In fact, only a small portion of the Plan’s overall expenses goes towards administrative costs. In 2014, for example, the Board spent over $132 million in benefit payments to participants and $2.4 million in administrative expenses, less than 2% of the amount of benefit payments.

In the event the Board files a MPRA application for proposed benefit reductions, it will be submitted to the Department of the Treasury for approval in the second half of 2016. Benefit reductions, if approved by the Department of the Treasury, would commence July 1, 2017.

Any reductions to benefits would affect almost everyone, including retirees receiving benefits, active (working) participants, inactive vested participants and beneficiaries. However, MPRA does not allow benefits to be reduced for retirees receiving a disability benefit nor for retirees who are 80 years or older. Benefit reductions will be smaller for those retirees age 75 to 80. In no event may a participant’s benefit be reduced to less than 110% of the participant’s benefit level guaranteed by the PBGC, a federal agency created to protect private sector pension plans.

There has been no final determination as to the amount of the benefit reductions. The Board has been working closely with the Plan actuary to come up with a proposal to reduce benefits the least amount possible while also leading the Plan back on the path to solvency.

If the benefit reduction application is filed with the Department of Treasury, each participant, retiree and beneficiary will receive a notice and an individualized statement of how the benefit reductions will affect your benefit.

The Plan is currently scheduled to become insolvent, or run out of money to pay benefits, in 2030. Until it runs out of money, you will continue to receive your pension from the Plan. Even if the Plan runs out of money, the PBGC could step in to pay a portion of your pension benefits. If the Plan ends without sufficient money to pay all benefits, PBGC’s insurance program will pay the benefit provided by the Plan up to the PBGC’s legal limit. In general, the maximum benefit currently guaranteed by the PBGC is $35.75 per month, multiplied by the participant’s years of credited service. The PBGC’s rules are complicated and your specific benefit will depend on your individual situation. Should you wish to obtain additional information about the PBGC, you may go to http://www.pbgc.gov/. Also, the PBGC has projected that it will run out of money in its own Multiemployer Program to pay the PBGC guaranteed benefit in 2025, five years before the Plan is scheduled to run out of money.

Yes. While the Board is considering its options for benefit reductions under MPRA, you can submit feedback to the Plan at: