Bailout for pension fund of Local 138 averts looming insolvency

The distressed pension fund of a Long Island union will receive a $112.6 million bailout from the federal Pension Benefit Guarantee Corp., officials said.

The pension fund of Local 138 in Baldwin, covering 1,723 union members in the transportation and warehouse industries, projected that it would reach insolvency in 2022, according to its application for assistance.

The Long Island local was the first multi-employer application approved under the Special Assistance Program created under the Biden administration’s American Rescue Plan, signed into law in March.

That $1.9 trillion stimulus package provided funding for the PBGC’s multi-employer program, which itself was projected to become insolvent in fiscal 2026.

Without the funding injection, Local 138, an affiliate of Local 802 of the International Brotherhood of Teamsters, would have been required to cut pensioners’ benefits about 20% below the benefits expected under the plan’s terms, the PBGC said in a statement.

Charles Pergue, an attorney who filed the application to the PBGC, did not immediately respond to a request for comment.

Christina Maderich, the Local 138 fund administrator, said she was seeking clearance from the board of trustees to provide further information.

Sen. Charles Schumer (D-NY) said in a statement that he pushed to include pension relief in the American Rescue Plan because employees "should not be cruelly denied the benefits they worked their whole lives to accrue."

In a statement, Rep. Kathleen Rice (D-Garden City) said the funding is sparing Local 138’s pensioners "from devastating cuts."

At the end of 2006, the pension fund had assets with a market value of $73 million, accounting for 87.7% of accumulated benefits, but by the end of 2018, market value of assets was $23.9 million, less than 20% of accumulated benefits, according to the PBGC application.

By the end of 2020, the fund’s net assets available for benefits had tumbled to $11.9 million. The fund paid about $7 million to participants in 2020, according to the application.

The pension fund blamed the economic downturn of 2008 and 2009 as a prime cause of its financial straits.

That period was responsible for "a tremendous funding burden related to the loss in asset value and reduction in employment [and future contributions]," according to its PBGC application.

Employers contributing to the Local 138 pension fund included Krasdale Foods, Grocery Haulers and SLB Transportation.

The PBGC, created in 1974, is charged with protecting defined benefit pension plans, which provide a specified monthly payment.

The agency covers multi-employer pension plans like that of Local 138 as well as single-employer plans.

In November 2020, the PBGC took control of the J.C. Penney Corp. Inc. pension plan after the Plano, Texas, retailer was sold to a joint venture that declined to become trustee of the pension plan.

By Ken Schachter

kenneth.schachter@newsday.comkschach

Ken Schachter covers corporate news, including technology and aerospace, and other business topics for Newsday. He has also worked at The Miami Herald and The Jerusalem Post.