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Multiemployer Plans and Partition

What is a partition?

A partition divides a multiemployer pension plan into two smaller plans. The guaranteed benefits of some participants in the original plan are transferred to a “successor” plan. PBGC pays for the guaranteed benefits in the successor plan.

Why would a plan do this?

A partition relieves stress on the original plan, by transferring a part of the benefits to a plan funded by PBGC. It is used when the trustees of a plan have determined that the plan will run out of money unless it takes major steps.

When a plan is out of money (i.e., “insolvent”), PBGC pays to keep the failed plan going – but it can only pay benefits up to the limits of PBGC’s guarantee. If your annual benefit is more than the PBGC guarantee when your plan fails, your benefit must be reduced to that level. (The guarantee amount will depend on your service and plan benefit. For someone with 30 years of service it would not be bigger than $12,870 per year. You can estimate your PBGC-guaranteed benefit by using the formula on our Multiemployer Insurance Program Facts page.)

When a plan is out of money the law forces a reduction of benefits down to the PBGC guarantee level. However, before it completely runs out of money, a plan headed toward insolvency may be able to take steps to try to protect participants for life by applying for less severe benefit reductions at an earlier date (“suspension”) through the Department of the Treasury and a partition through PBGC.

The trustees of a plan may seek a suspension and a partition to preserve as much of each person’s benefit as possible while avoiding insolvency. The rules for benefit suspension require that participants receive at least the benefit they would have received if the PBGC guarantee were 10 percent higher. Some older and disabled participants may receive their full benefit. The partition does not further reduce the participant’s benefit amount – it just shares the responsibility for paying for the benefit between the original plan and PBGC (via the successor plan).

How does a partition work?

Before a plan can be partitioned, the trustees of the plan have to take all reasonable measures to avoid insolvency. PBGC is required to examine all the efforts made by the plan, in addition to benefit reductions.

If PBGC approves the partition, the plan splits into two plans: the original plan and a successor plan. Both plans will still be administered by the original plan. The original plan will continue to maintain the records, answer questions, process all the paperwork, and distribute benefits for both plans. The difference is that the original plan is an independent, ongoing plan responsible for its own benefit payments, while the successor plan is paid for by financial assistance from PBGC.

How do I find out more about my plan?

PBGC maintains a list of all plans that have made an application for partition. That list is public (see partition requests below). The Department of Treasury also maintains a list of plans that have applied for suspension (see Applications for Benefit Suspension). PBGC and the Department of Treasury (and also the Department of Labor) coordinate on both types of applications, The Department of Treasury publicly posts plan applications on its site. That site (and your plan) are likely to have the most information on your plan.

Partition Requests

Road Carriers Local 707 Pension Fund

    • Partition Application (See Exhibits 7A-7M)
    • On June 10, 2016, PBGC issued its decision on the Road Carriers Local – 707 Pension Fund application for a partition under the Multiemployer Pension Reform Act of 2014. The plan’s application was denied because it failed to meet the legal requirement that the plan would remain solvent following a partition. The letter notifying the plan about PBGC’s decision can be viewed here.

Bricklayers and Allied Craftworkers Local 5 New York Retirement Fund Pension Plan