Twenty-two multiemployer pension plans (MEPPs), representing more than 25,000 participants, have filed suit against the Pension Benefit Guaranty Corporation (PBGC) in the United States District Court for the District of Columbia, alleging that the agency improperly denied them access to billions of dollars in emergency retirement funding.
What’s at stake? In 2021, Congress passed the American Rescue Plan Act (ARPA) and created a special financial assistance (SFA) program to rescue troubled MEPPs from insolvency. ARPA was the latest in a long line of legislation intended to bolster MEPPs. It was designed to protect benefits for workers who spent their careers earning them. According to the complaint in Sports Arena Employees, Local No. 137 Retirement Plan et al. v. Pension Benefit Guaranty Corporation, Congress charged the PBGC with a straightforward mandate: accept applications, review them within 120 days, and (absent an affirmative denial of the application within that time) distribute the funds.
What went wrong? According to the lawsuit, the PBGC failed to meet that mandate. Instead of processing applications promptly, the agency established an authorized “waitlist” system—one the plaintiffs say Congress never authorized—that prevented plans from applying for SFA. Plans that had been waiting for over a year were left without a clear timeline for when they would be allowed to apply. On average, the plans bringing this suit have languished on the waitlist for nearly a year.
A MEPP is “terminated” when all employers have withdrawn. (Unlike terminated single-employer pension plans, the termination of a MEPP does not mark the end of its operation.) The lawsuit challenges the PBGC’s position that terminated MEPPs are ineligible for the program. The United States Court of Appeals for the Second Circuit rejected that interpretation in Board of Trustees of the Bakery Drivers Loc. 550 v. Pension Benefit Guar. Corp., and the Supreme Court declined to grant certiorari. All 22 MEPPs that brought suit have already terminated and are located outside the Second Circuit (whose jurisdiction includes New York, Connecticut, and Vermont). The complaint alleges that the PBGC has continued to bar terminated plans outside the Second Circuit from applying and has permitted other terminated MEPPs in the Second Circuit to move ahead of them in the queue.
Who is affected? The alleged real-world consequences are severe. Eight of the 22 named plans are already insolvent and have had to reduce benefits—in some cases by more than 50%. Three more are expected to become insolvent within the next year. Retirees, many of whom are over 75 and come from blue-collar industries, are alleged to have seen modest benefits shrink to levels that threaten their basic financial security. Further, because benefits will be restored only to participants who are alive when SFA is received, prolonged delays are alleged to increase the risk that some retirees will never receive the relief ARPA was intended to provide.
What are the plans seeking? The lawsuit asks the court to throw out the PBGC’s waitlist system, order the agency to accept the plans’ applications immediately, and ensure the agency reviews them fairly and on time — just as Congress intended. Collectively, the 22 plans estimate they are owed roughly $450 million in emergency funding.
The bottom line: In enacting ARPA, Congress set aside billions to protect pension benefits for retirees in unionized industries. The plans behind this lawsuit say the PBGC has acted unlawfully by failing to distribute those funds fast enough, to the detriment of thousands of retirees. The case is now before a federal court in Washington, D.C.
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