prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.

Report 1: This report provides responses to frequently asked questions about the Temporary Assistance for Needy Families (TANF) block grant  It is intended to serve as a quick reference to provide easy access to information and data  Appendix B presents a series of tables with state-level data  This report does not provide information on TANF program rules (for a discussion of TANF rules, see CRS Report RL32748, The Temporary Assistance for Needy Families (TANF) Block Grant: A Primer on TANF Financing and Federal Requirements , by Gene Falk)  On January 24, 2019, the President signed legislation ( P L  116-4 ) that funds TANF and related programs through June 30, 2019  The legislation permits states to receive their quarterly TANF grants for the 2 nd quarter (January through March) and 3 rd quarter (April through June) of FY2019  Additional legislation would be required to pay TANF grants in the final quarter (July through September) of FY2019  TANF programs are funded through a combination of federal and state funds  In FY2018, TANF has two federal grants to states  The bulk of the TANF funding is in a basic block grant to the states, totaling $16 5 billion for the 50 states, the District of Columbia, Puerto Rico, Guam, the Virgin Islands, and American Indian tribes  There is also a contingency fund available that provides extra federal funds to states that meet certain conditions  Additionally, states are required to expend a minimum amount of their own funds for TANF and TANF-related activities under what is known as the maintenance of effort (MOE) requirement  States are required to spend at least 75% of what they spent in FY1994 on TANF's predecessor programs  The minimum MOE amount, in total, is $10 3 billion per year for the 50 states, the District of Columbia, and the territories  TANF was created in the 1996 welfare reform law, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA, P L  104-193 )  A TANF basic block grant amount—both nationally and for each state—was established in the 1996 welfare reform law  The amount established in that law for the 50 states, District of Columbia, territories, and tribes was $16 6 billion in total  From FY1997 through FY2016, that amount remained the same  It was not adjusted for changes that occur over time, such as inflation, the size of the TANF assistance caseload, or changes in the poverty population  During this period, the real (inflation-adjusted) value of the block grant declined by one-third (33 1%)  Beginning with FY2017, the state family assistance grant was reduced by 0 33% from its historical levels to finance TANF-related research and technical assistance  The reduced block grant amount is $16 5 billion  Table 1 shows the state family assistance grant, in both nominal (actual) and real (inflation-adjusted) dollars for each year, FY1997 through FY2018  In real (inflation-adjusted) terms, the FY2018 block grant was 36% below its value in FY1997  Figure 1 shows the uses of federal TANF grants to states and state MOE funds in FY2017  In FY2017, a total of $31 1 billion of both federal TANF and state MOE expenditures were either expended or transferred to other block grant programs  Basic assistance—ongoing benefits to families to meet basic needs—represented 23% ($7 1 billion) of total FY2017 TANF and MOE dollars  TANF is a major contributor of child care funding  In FY2017, $5 billion (16% of all TANF and MOE funds) were either expended on child care or transferred to the child care block grant (the Child Care and Development Fund, or CCDF)  TANF work-related activities (including education and training) were the third-largest TANF and MOE spending category at $3 3 billion, or 11% of total TANF and MOE funds  TANF also helps low-wage parents by helping to finance state refundable tax credits, such as state add-ons to the Earned Income Tax Credit (EITC)  TANF and MOE expenditures on refundable tax credits in FY2017 totaled $2 8 billion, or 9% of total TANF and MOE spending  TANF is also a major contributor to the child welfare system, which provides foster care, adoption assistance, and services to families with children who either have experienced or are at risk of experiencing child abuse or neglect, spending about $2 2 billion on such activities  TANF and MOE funds also help fund state prekindergarten (pre-K) programs, with total FY2017 expenditures for that category also at $2 5 billion  TANF and MOE funds are also used for short-term and emergency benefits and a wide range of other social services  For state-specific information on the use of TANF funds, see Table B-1 and Table B-2   TANF law permits states to "reserve" unused funds without time limit  This permits flexibility in timing of the use of TANF funds, including the ability to "save" funds for unexpected occurrences that might increase costs (such as recessions or natural disasters)  At the end of FY2017 (September 30, 2017, the most recent data currently available), a total of $5 1 billion of federal TANF funding remained neither transferred nor spent  However, some of these unspent funds represent monies that states had already committed to spend later  At the end of FY2017, states had made such commitments to spend—that is, had obligated—a total of $1 8 billion  At the end of FY2017, states had $3 3 billion of "unobligated balances " These funds are available to states to make new spending commitments  Table B-3 shows unspent TANF funds by state  This number is not known  Federal TANF reporting requirements focus on families receiving only ongoing assistance   There is no complete reporting on families receiving other TANF benefits and services  Assistance is defined as benefits provided to families to meet ongoing, basic needs  It is most often paid in cash  However, some states use TANF or MOE funds to provide an "earnings supplement" to working parents added to monthly Supplemental Nutrition Assistance Program (SNAP) allotments  These "earnings supplements" are paid separately from the regular TANF cash assistance program  Additionally, TANF MOE dollars are used to fund food assistance for immigrants barred from regular SNAP benefits in certain states  These forms of nutrition aid meet an ongoing need, and thus are considered TANF assistance  As discussed in a previous section of this report, TANF basic assistance accounts for about 24% of all TANF expenditures  Therefore, the federal reporting requirements that pertain to families receiving "assistance" are likely to undercount the number of families receiving any TANF-funded benefit or service  Table 2 provides assistance caseload information  A total of 1 2 million families, composed of 3 1 million recipients, received TANF- or MOE-funded assistance in September 2018  The bulk of the "recipients" were children—2 3 million in that month  For state-by-state assistance caseloads, see Table B-4   Figure 2 provides a long-term historical perspective on the number of families receiving assistance from TANF or its predecessor program, from July 1959 to September 2017  The shaded areas of the figure represent months when the national economy was in recession  Though the health of the national economy has affected the trend in the cash assistance caseload, the long-term trend in receipt of cash assistance does not follow a classic countercyclical pattern  Such a pattern would have the caseload rise during economic slumps, and then fall again during periods of economic growth  Factors other than the health of the economy (demographic trends, policy changes) also have influenced the caseload trend  The figure shows two periods of sustained caseload increases: the period from the mid-1960s to the mid-1970s and a second period from 1988 to 1994  The number of families receiving assistance peaked in March 1994 at 5 1 million families  The assistance caseload fell rapidly in the late 1990s (after the 1996 welfare reform law) before leveling off in 2001  In 2004, the caseload began another decline, albeit at a slower pace than in the late 1990s  During the recent 2007-2009 recession and its aftermath, the caseload began to rise from 1 7 million families in August 2008, peaking in December 2010 at close to 2 0 million families  By September 2018, the assistance caseload had declined to 1 2 million families  Table B-5 shows recent trends in the number of cash assistance families by state  Before PRWORA, the "typical" family receiving assistance has been headed by a single parent (usually the mother) with one or two children  That single parent has also typically been unemployed  However, over the past 20 years the assistance caseload decline has occurred together with a major shift in the composition of the rolls  Figure 3 shows the change in the size and composition of the assistance caseload under both AFDC (1988 and 1994) and TANF  In FY1988, an estimated 84% of AFDC families were headed by an unemployed adult recipient  In FY2016, families with an unemployed adult recipient represented 32% of all cash assistance families  This decline occurred, in large part, as the number of families headed by unemployed adult recipients declined more rapidly than other components of the assistance caseload  In FY1994, a monthly average of 3 8 million families per month who received AFDC cash assistance had adult recipients who were not working  In FY2016, a monthly average of 485,000 families per month had adult recipients or work-eligible individuals, with no adult recipient or work-eligible individual working  With the decline in families headed by unemployed adults, the share of the caseload represented by families with employed adults and "child only" families has increased  In FY2017, families with all adult recipients unemployed and families with employed adult recipients each represented 31% of all assistance families  The latter category includes families in "earnings supplement" programs separate from the regular TANF cash assistance program  "Child-only" families are those where no adult recipient receives benefits in their own right; the family receives benefits on behalf of its children  The share of the caseload that was child-only in FY2017 was 38%  In FY2017, families with a nonrecipient, nonparent relative (grandparents, aunts, uncles) represented 14% of all assistance families  Families with ineligible, noncitizen adults or adults who have not reported their citizenship status made up 9% of the assistance caseload in that year  Families where the parent received Supplemental Security Income (SSI) and the children received TANF made up 9% of all assistance families in FY2017  There are no federal rules that help determine the amount of TANF cash benefits paid to a family  (There are also no federal rules that require states to use TANF to pay cash benefits, though all states do so ) Benefit amounts are determined solely by the states  Most states base TANF cash benefit amounts on family size, paying larger cash benefits to larger families on the presumption that they have greater financial needs  The maximum monthly cash benefit is usually paid to a family that receives no other income (e g , no earned or unearned income) and complies with program rules  Families with income other than TANF often are paid a reduced benefit  Moreover, some families are financially sanctioned for not meeting a program requirement (e g , a work requirement), and are also paid a lower benefit  Figure 4 shows the maximum monthly TANF cash benefit by state for a single mother caring for two children (family of three) in July 2016  The benefit amounts shown are those for a single-parent family with two children  For a family of three, the maximum TANF benefit paid in July 2017 varied from $170 per month in Mississippi to $1,201 per month in New Hampshire  The map shows a regional pattern to the maximum monthly benefit paid, with lower benefit amounts in the South than in other regions  Only New Hampshire (at 60% of the federal poverty guidelines) had a maximum TANF cash assistance amount for this sized family in excess of 50% of poverty-level income  TANF's main federal work requirement is actually a performance measure that applies to the states, rather than individual recipients  States determine the work rules that apply to individual recipients  The TANF statute requires states to have 50% of their caseload meet standards of participation in work or activities—that is, a family member must be in specified activities for a minimum number of hours  There is a separate participation standard that applies to the two-parent portion of a state's caseload, requiring 90% of the state's two-parent caseload to meet participation standards  However, the statutory work participation standards are reduced by a "caseload reduction credit " The caseload reduction credit reduces the participation standard one percentage point for each percentage point decline in a state's caseload  Additionally, under a regulatory provision, a state may get "extra" credit for caseload reduction if it spends more than required under the TANF MOE  Therefore, the effective standards states face are often less than the 50% and 90% targets, and vary by state and by year  States that do not meet the TANF work participation standard are at risk of being penalized through a reduction in their block grant  However, penalties can be forgiven if a state claims, and the Secretary of HHS finds, that it had "reasonable cause" for not meeting the standard  Penalties can also be forgiven for states that enter into "corrective compliance plans," and subsequently meet the work standard  The 50% and 90% target standards that states face, as well as the caseload reduction credit, date back to the 1996 welfare reform law  However, the Deficit Reduction Act of 2005 (DRA, P L  109-171 ) made several changes to the work participation rules effective in FY2007 The caseload reduction credit was changed to measure caseload reduction from FY2005, rather than the original law's FY1995  The work participation standards were broadened to include families receiving cash aid in "separate state programs " Separate state programs are programs run with state funds, distinct from a state's "TANF program," but with expenditures countable toward the TANF MOE  HHS was instructed to provide definition to the allowable TANF work activities listed in law  HHS was also required to define what is meant by a "work-eligible" individual, expanding the number of families that are included in the work participation calculation  States were required to develop plans and procedures to verify work activities  The American Recovery and Reinvestment Act of 2009 (ARRA, P L  111-5 ), a law enacted in response to the sharp economic downturn of 2007-2009, held states "harmless" for caseload increases affecting the work participation standards for FY2009 through FY2011  It did so by allowing states to "freeze" caseload reduction credits at pre-recession levels through the FY2011 standards  HHS computes two work participation rates for each state that are then compared with the effective (after-credit) standard to determine if it has met the TANF work standard  An "all-families" work participation rate is computed and compared with the all-families effective standard (50% minus the state's caseload reduction credit)  HHS also computes a two-parent work participation rate that is compared with the two-parent effective standard (90% minus the state's caseload reduction credit)  Figure 5 shows the national average all-families work participation rate for FY2002 through FY2017  For the period FY2002 through FY2011, states achieved an average all-families work participation rate hovering around 30%  The work participation rate increased since then  In FY2016, it exceeded 50% for the first time since TANF was established  However, it is important to note that the increase in the work participation rate has not come from an increase in the number of recipients in regular TANF assistance programs who are either working or in job preparation activities  This increase stems mostly from states creating new "earnings supplement" programs that use TANF funds to aid working parents in the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) or who have left the regular TANF assistance programs for work  Figure 6 shows which states did not meet the TANF all-families work participation standards from FY2006 through FY2017  Before FY2007, the first year that DRA was effective, only a few jurisdictions did not meet TANF all-families work participation standards  However, in FY2007, 15 jurisdictions did not meet the all-families standard  This number declined to 9 in FY2008 and 8 in FY2009  In FY2012, despite the uptick in the national average work participation rate, 16 states did not meet the all-family standard, the largest number of states that did not meet their participation standards in any one year since the enactment of TANF  FY2012 was the year that ARRA's "freeze" of the caseload reduction credit expired, and states were generally required to meet higher standards than in previous years  The number of jurisdictions that did not meet the all-families standard declined over the FY2012 to FY2017 period  In FY2017, two jurisdictions did not meet the all-family participation standard: Nevada and Guam  In addition to meeting a work standard for all families, TANF also imposes a second standard—90%—for the two-parent portion of its cash assistance caseload  This standard can also be lowered by caseload reduction  Figure 7 shows whether each state met its two-parent work participation standard for FY2006 through FY2017  However, the display on the table is more complex than that for reporting whether a state met or did not meet its "all family" rate  A substantial number of states have reported no two-parent families subject to the work participation standard  These states are denoted on the table with an "NA," indicating that the two-parent standard was not applicable to the state in that year  Before the changes made by the DRA were effective, a number of states had their two-parent families in separate state programs that were not included in the work participation calculation  When DRA brought families receiving assistance in separate state programs into the work participation rate calculations, a number of states moved these families into solely state-funded programs  These are state-funded programs with expenditures not countable toward the TANF maintenance of effort requirement, and hence are outside of TANF's rules  For states with two-parent families in their caseloads, the table reports "Yes" for states that met the two-parent standard, and "No" for states that did not meet the two-parent standard  Of the 28 jurisdictions that had two-parent families in their FY2017 TANF work participation calculation, 19 met the standard and 9 did not  Appendix A  Supplementary Tables Appendix B  State Tables


Report 2:  if the officer is survived by only a spouse, 100% of the death benefits are payable to the spouse; 2  if the officer is survived by a spouse and children, 50% of the death benefits are payable to the spouse and the remaining 50% is distributed equally among the officer's children; 3  if the officer is survived by only children, the death benefits are equally distributed among the officer's children; 4  if the officer has no surviving spouse or children, the death benefits are paid to the individual or individuals designated by the officer in the most recently executed designation of beneficiary on file at the time of the officer's death; or if the officer does not have a designation of beneficiary on file, the benefits are paid to the individual or individuals designated by the officer in the most recently executed life insurance policy on file at the time of the officer's death; 5  if the officer has no surviving spouse or eligible children, and the officer does not have a life insurance policy, the death benefits are equally distributed between the officer's surviving parents; or 6  if the officer has no surviving spouse, eligible children, or parents, and the officer did not have a designation of beneficiary or a life insurance policy on file at the time of his or her death, the death benefits are payable to surviving adult, nondependent, children of the officer  PSOB disability benefits are paid only in cases of permanent and total disability  There are no benefits payable for partial or short-term disabilities  A disability is considered permanent for the purposes of PSOB eligibility if, given the current state of medicine in the United States, there is a degree of medical certainty that the condition will remain constant or deteriorate over the person's lifetime or that the public safety officer has reached maximum medical improvement  A public safety officer is considered to be totally disabled for the purposes of PSOB eligibility if given the current state of medicine in the United States, there is a degree of medical certainty that the officer is unable to perform any gainful work  PSOB regulation defines gainful work as "full- or part-time activity that is compensated or commonly compensated " Applications for PSOB death and disability benefits are filed with the PSOB office, which determines benefit eligibility and commences benefit payment  Unless extended for good cause, application deadlines must be met  Complete benefit applications must be filed no later than for death benefits: three years after the death; one year after the determination of the officer's employing agency to award or deny death benefits payable by that agency; or one year after certification by the officer's employing agency that the agency is not authorized to pay any death benefits; and for disability benefits: three years after the date of the injury; one year after the determination of the officer's employing agency to award or deny workers' compensation or disability benefits payable by that agency; or one year after certification by the officer's employing agency that the agency is not authorized to pay any workers' compensation or disability benefits  A lump-sum interim payment of up to $3,000 may be made if a PSOB death benefit will "probably be paid " The interim payment amount reduces the final PSOB payment amount  If the ultimate decision is to deny death benefits, the interim payment must be returned to the federal government, unless this repayment is waived because it would create a hardship for the beneficiary  Section 611 of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act; P L  107-56 ) provides for expedited payment of PSOB death and disability benefits if the officer's injury occurred "in connection with prevention, investigation, rescue, or recovery efforts related to a terrorist attack " In such cases, PSOB benefits must be paid within 30 days of certification from the officer's employing agency that the officer's death or disability was related to terrorism  The Public Safety Officers' Education Assistance (PSOEA) program provides financial assistance with costs associated with higher education to the spouse or children of a public safety officer who is eligible for PSOB death or disability benefits  The spouse or child of a public safety officer who is eligible for PSOB death or disability benefits may be eligible for PSOEA benefits  To be eligible for PSOEA benefits, a spouse must have been married to an eligible public safety officer at the time of the officer's death or injury  A child is eligible for PSOEA benefits until the age of 27  This age limit can be extended by the Attorney General in extraordinary circumstances, or, pursuant to Section 3 of the Public Safety Officers' Benefits Improvement Act of 2017 ( P L  115-36 ), if there is a delay of more than one year in approving PSOB or PSOEA benefits  In addition, to be eligible for PSOEA benefits, the spouse or child must be enrolled at an eligible educational institution  For the purposes of PSOEA eligibility, an eligible education institution is one that meets the definition of an "institution of higher education" as provided by Section 102 of the Higher Education Act of 1965 and that is eligible for federal student aid  PSOEA benefits are payable to the claimant and may be used only to defray costs associated with higher education attendance, including tuition, room, board, book and supplies, and education-related fees  The monthly PSOEA benefit amount is equal to the monthly benefit amount payable under the GI Bill Survivors' and Dependents' Educational Assistance (DEA) program, which is administered by the Department of Veterans Affairs (VA) for spouses and dependents of veterans with disabilities or who died as a result of service-connected conditions  The PSOEA benefit amounts are adjusted annually to reflect changes in the cost of living in accordance with changes to the GI Bill DEA benefit amounts  For FY2019, the PSOEA monthly benefit for a student attending an educational institution full-time is $1,224  The PSOEA benefit rates are prorated for less than full-time attendance  The maximum duration of PSOEA benefits for any person is 45 months of full-time education or a proportionate duration of part-time education  A person is ineligible for PSOEA if he or she is in default on a federal student loan or is ineligible for federal benefits due to a drug trafficking or drug possession conviction  In addition, the Attorney General may discontinue PSOEA benefits for a student that fails to make satisfactory progress in his or her course of study as defined by Section 484(c) of the Higher Education Act of 1965  A claimant who is dissatisfied with a PSOB disability benefit denial may request a reconsideration  There is no reconsideration offered for denials of PSOB death or PSOEA benefits  A claimant who is dissatisfied with a PSOB or PSOEA benefit denial may request a de novo hearing before a hearing officer assigned by the director of the DOJ PSOB Office  The determination of a hearing officer may be appealed to the PSOB Office director  The director's determination is considered the final agency determination and is not subject to any further agency administrative review or appeal  However, provided all administrative appeals remedies have been exhausted, the PSOB Office director's determination may be appealed to the United States Court of Appeals for the Federal Circuit  The PSOB statute authorizes the BJA to prescribe the maximum fee that an attorney or other representative may charge a claimant for services rendered in connection with a claim, with attorney fees generally limited to between 3% and 6% of the total benefit paid, depending on the level in the administrative appeals process the claim is approved  Program regulation prohibits stipulated-fee and contingency-fee arrangements for PSOB representation  Congress provides funding for PSOB and PSOE benefits and associated administrative expenses in the annual Departments of Commerce and Justice, Science, and Related Agencies Appropriations Act  Funding for PSOB death benefits and associated administrative expenses is considered mandatory spending and Congress appropriates "such sums as may be necessary" for the payment of these benefits  Funding for PSOB disability and PSOEA benefits is considered discretionary and is subject to specific congressional appropriations  Annual appropriations language grants the Attorney General the authority to transfer from any available appropriations to the DOJ the funds necessary to respond to emergent circumstances that require additional funding for PSOB disability benefits and PSOEA benefits  

ground_truth: The Temporary Assistance for Needy Families (TANF) block grant funds a wide range of benefits and services for low-income families with children. TANF was created in the 1996 welfare reform law (P.L. 104-193). This report responds to some frequently asked questions about TANF; it does not describe TANF rules (see, instead, CRS Report RL32748, The Temporary Assistance for Needy Families (TANF) Block Grant: A Primer on TANF Financing and Federal Requirements, by Gene Falk). TANF Funding and Expenditures. TANF provides fixed funding for the 50 states, the District of Columbia, the territories, and American Indian tribes. The basic block grant totals $16.5 billion per year. States are also required in total to contribute, from their own funds, at least $10.3 billion annually under a maintenance-of-effort (MOE) requirement. Though TANF is best known for funding cash assistance payments for needy families with children, the block grant and MOE funds are used for a wide variety of benefits and activities. In FY2017, expenditures on basic assistance totaled $7.1 billion—23% of total federal TANF and MOE dollars. Basic assistance is often—but not exclusively—paid as cash. In addition to funding basic assistance, TANF also contributes funds for child care and services for children who have been, or are at risk of being, abused and neglected. Some states also count expenditures in prekindergarten programs toward the MOE requirement. The TANF Assistance Caseload. A total of 1.2 million families, composed of 3.1 million recipients, received TANF- or MOE-funded assistance in September 2018. The bulk of the "recipients" were children—2.3 million in that month. The assistance caseload is heterogeneous. The type of family once thought of as the "typical" assistance family—one with an unemployed adult recipient—accounted for 32% of all families on the rolls in FY2016. Additionally, 31% of cash assistance families had an employed adult, while 38% of all TANF families were "child-only" and had no adult recipient. Child-only families include those with disabled adults receiving Supplemental Security Income (SSI), adults who are nonparents (e.g., grandparents, aunts, uncles) caring for children, and families consisting of citizen children and ineligible noncitizen parents. Cash Assistance Benefits. TANF cash benefit amounts are set by states. In July 2017, the maximum monthly benefit for a family of three ranged from $1,021 in New Hampshire to $170 in Mississippi. Only New Hampshire (at 60% of the federal poverty guidelines) had a maximum TANF cash assistance amount for this sized family in excess of 50% of poverty-level income. Work Requirements. TANF's main federal work requirement is actually a performance measure that applies to the states. States determine the work rules that apply to individual recipients. TANF law requires states to engage 50% of all families and 90% of two-parent families with work-eligible individuals in work activities, though these standards can be reduced by "credits." Therefore, the effective standards states face are often less than the 50% or 90% targets, and vary by state. In FY2017, states achieved, on average, an all-family participation rate of 53.0% and a two-parent rate of 69.5%. In FY2017, two jurisdictions did not meet the all-family participation standard: Nevada and Guam. This is a reduction from FY2012, when 16 states did not meet that standard. In FY2017, nine jurisdictions did not meet the two-parent standard. States that do not meet work standards are at risk of being penalized by a reduction in their block grant.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.



Report 2: CSPF is a defined benefit multiemployer pension plan  Multiemployer plans are often created and maintained through collective bargaining agreements between labor unions and two or more employers, so that workers who move from job to job and employer to employer within an industry can continue to accrue pension benefits within the same plan over the course of their careers  Multiemployer plans are typically found in industries with many small employers such as trucking, building and construction, and retail food sales  In 2017, there were about 1,400 defined benefit multiemployer plans nationwide covering more than 10 million participants  Most multiemployer plans are jointly administered and governed by a board of trustees selected by labor and management  The labor union typically determines how the trustees representing labor are chosen and the contributing employers or an employer association typically determines how the trustees representing management are chosen  The trustees set the overall plan policy, direct plan activities, and set benefit levels (see fig  1)  Multiemployer plans are “prefunded,” or funded in advance, primarily by employer contributions  The employer contribution is generally negotiated through a collective bargaining agreement, and is often based on a dollar amount per hour worked by each employee covered by the agreement  Employer contributions are pooled in a trust fund for investment purposes, to pay benefits to retirees and their beneficiaries, and for administrative expenses  Multiemployer plan trustees typically decide how the trust fund should be invested to meet the plan’s objectives, but the trustees can use investment managers to determine how the trust fund should be invested  Multiemployer plan trust funds can be allocated among many different types of assets, any of which can generally be passively- or actively-managed, domestically or internationally based, or publicly or nonpublicly traded (see table 1)  A plan’s funded percentage is its ratio of plan assets to plan liabilities  Because the amount needed to pay pension benefits for many years into the future cannot be known with certainty due to a variety of economic and demographic factors, including the potential volatility of asset values, estimates of a plan’s funded percentage may vary from year to year  Defined benefit pension plans use a “discount rate” to convert projected future benefits into their “present value ” The discount rate is the interest rate used to determine the current value of estimated future benefit payments and is an integral part of estimating a plan’s liabilities  The higher the discount rate, the lower the plan’s estimate of its liability  Multiemployer plans use an “assumed-return approach” that bases the discount rate on a long-term assumed average rate of return on the pension plan’s assets  Under this approach, the discount rate depends on the allocation of plan assets  For example, a reallocation of plan assets into more stocks and fewer bonds typically increases the discount rate, which reduces the estimated value of plan liabilities, and therefore, reduces the minimum amount of funding required  Looking at the entire “multiemployer system”—the aggregation of multiemployer plans governed by ERISA and insured by PBGC—shows that while the system was significantly underfunded around 2001 and 2009, its funded position has improved since 2009  Specifically, analyses published by the Center for Retirement Research at Boston College and the Society of Actuaries used plan regulatory filings to calculate the funded status for the system and determined that it was approaching 80 percent funded by 2014 after falling during the 2008 market downturn  However, some observers have noted that while many plans are making progress toward their minimum targets, a subset of plans face serious financial difficulties  Multiemployer retirement benefits are generally determined by the board of trustees  The bargaining parties negotiate a contribution rate and the trustees adopt or amend the plan’s benefit formulas and provisions  Decisions to increase benefits or change the plan are also typically made by the board of trustees  Benefit amounts are generally based on a worker’s years of service and either a flat dollar amount or the worker’s wage or salary history, subject to further adjustment based on the age of retirement  CSPF was established in 1955 to provide pension benefits to International Brotherhood of Teamsters union members (Teamsters) in the trucking industry, and it is one of the largest multiemployer plans  In the late 1970s, CSPF was the subject of investigations by the IRS within the U S  Department of the Treasury (Treasury), and by DOL and the U S  Department of Justice (DOJ)  The DOL investigation ultimately resulted in the establishment of a federal court-enforceable consent decree in 1982 that remains in force today  CSPF held more than $4 3 billion in Net Assets at the end of 1982 after the consent decree was established  The plan’s Net Assets peaked at nearly $26 8 billion at the end of 2007 and declined to about $15 3 billion at the end of 2016 (see fig  2)  As of 2016, CSPF reported that it had about 1,400 contributing employers and almost 385,000 participants  The number of active CSPF participants has declined over time  In 2016, 16 percent of about 385,000 participants were active, i e , still working in covered employment that resulted in employer contributions to the plan  In comparison, CSPF reported in 1982 that 69 percent of more than 466,000 participants were active participants  Since the 1980s, CSPF’s ratio of active to nonworking participants has declined more dramatically than the average for multiemployer plans  By 2015, only three of the plan’s 50 largest employers from 1980 still paid into the plan, and for each full-time active employee there were over five nonworking participants, mainly retirees  As a result, benefit payments to CSPF retirees have exceeded employer contributions in every year since 1984  Thus, CSPF has generally drawn down its investment assets  In 2016, CSPF withdrew over $2 billion from investment assets (see fig  3 )  CSPF has historically had fewer plan assets than were needed to fully fund the accrued liability—the difference referred to as unfunded liability  In 1982, we reported that CSPF was “thinly funded”—as the January 1, 1980, actuarial valuation report showed the plan’s unfunded liability was about $6 billion—and suggested that IRS should closely monitor CSPF’s financial status  In 2015, the plan’s actuary certified that the plan was in “critical and declining” status  The plan has been operating under an ERISA-required rehabilitation plan since March 25, 2008, which is expected to last indefinitely  As of January 1, 2017, the plan was funded to about 38 percent of its accrued liability  In September 2015, CSPF filed an application with Treasury seeking approval to reduce benefits pursuant to provisions in the Multiemployer Pension Reform Act of 2014 (MPRA), which is fully discussed later in this section  The application was denied in May 2016 based, in part, on Treasury’s determination that the plan’s proposed benefit suspensions were not reasonably estimated to allow the plan to remain solvent  In 2017, CSPF announced it would no longer be able to avoid the projected insolvency  (See app  II for a timeline of key events affecting CSPF ) As previously mentioned, CSPF was the subject of investigations in the 1970s by IRS, DOL, and DOJ  DOL’s investigation focused on numerous loan and investment practices alleged to constitute fiduciary breaches under ERISA, such as loans made to companies on the verge of bankruptcy, additional loans made to borrowers who had histories of delinquency, loans to borrowers to pay interest on outstanding loans that the fund recorded as interest income, and lack of controls over rental income  As a result of its investigation, DOL filed suit against the former trustees of CSPF and, in September 1982, the parties entered into a consent decree, which remains in force today  The consent decree provides measures intended to ensure that the plan complies with the requirements of ERISA, including providing for oversight by the court and DOL, and prescribes roles for multiple parties in its administration  For example, certain plan activities must be submitted to DOL for comment and to the court for approval, including new trustee approvals and some investment manager appointments  According to DOL, to prevent criminal influence from regaining a foothold of control over plan assets, the consent decree generally requires court-approved independent asset managers—called “named fiduciaries”—to manage CSPF’s investments  CSPF’s trustees are generally prohibited from managing assets; however, they remain responsible for selecting, subject to court approval, and overseeing named fiduciaries and monitoring plan performance  To focus attention on compliance with ERISA fiduciary responsibility provisions, the consent decree provides for a court-appointed independent special counsel with authority to observe plan activities and oversee and report on the plan  (See app  III for additional detail on the key provisions of the consent decree ) In 1974, Congress passed ERISA to protect the interests of participants and beneficiaries of private sector employee benefit plans  Among other things, ERISA requires plans to meet certain requirements and minimum standards  DOL, IRS, and PBGC are generally responsible for administering ERISA and related regulations  DOL has primary responsibility for administering and enforcing the fiduciary responsibility provisions under Part 4 of Title I of ERISA, which include the requirement that plan fiduciaries act prudently and in the sole interest of participants and beneficiaries  Treasury, specifically the IRS, is charged with determining whether a private sector pension plan qualifies for preferential tax treatment under the Internal Revenue Code  Additionally, the IRS is generally responsible for enforcing ERISA’s minimum funding requirements, among other things  ERISA generally requires that multiemployer plans meet minimum funding standards, which specify a funding target that must be met over a specified period of time  The funding target for such plans is measured based on assumptions as to future investment returns, rates of mortality, retirement ages, and other economic and demographic assumptions  Under the standards, a plan must collect a minimum level of contributions each year to show progress toward meeting its target, or the plan employers may be assessed excise taxes and owe the plan for missed contributions plus interest  Minimum contribution levels may vary from year to year due to a variety of economic and demographic factors, such as addressing differences between assumed investment returns and the plan’s actual investment returns  To protect retirees’ pension benefits in the event that plan sponsors are unable to pay plan benefits, PBGC was created by ERISA  PBGC is financed through mandatory insurance premiums paid by plans and plan sponsors, with premium rates set by law  PBGC operates two distinct insurance programs: one for multiemployer plans and another for single- employer plans  Each program has separate insurance funds and different benefit guarantee rules  The events that trigger PBGC intervention differ between multiemployer and single-employer plans  For multiemployer plans, the triggering event is plan insolvency, the point at which a plan begins to run out of money while not having sufficient assets to pay the full benefits that were originally promised when due  PBGC does not take over operations of an insolvent multiemployer plan; rather, it provides loan assistance to pay administrative expenses and benefits up to the PBGC-guaranteed level  According to PBGC, only once in its history has a financial assistance loan from the multiemployer pension insurance program been repaid  In 2017, PBGC provided financial assistance to 72 insolvent multiemployer plans for an aggregate amount of $141 million  For single-employer plans the triggering event is termination of an underfunded plan—generally, when the employer goes out of business or enters bankruptcy  When this happens, PBGC takes over the plan’s assets, administration, and payment of plan benefits (up to the statutory limit)  The PBGC-guaranteed benefit amounts for multiemployer plans and the premiums assessed by PBGC to cover those benefit guarantees are significantly lower than those for single-employer plans  Each insured multiemployer plan pays flat-rate insurance premiums to PBGC based on the number of participants covered  The annual premium rate for plan years beginning in January 2017 was $28 per participant and it is adjusted annually based on the national average wage index  (See app  II for the PBGC premium rates that have been in effect since the consent decree was established in 1982 ) When plans receive financial assistance, participants face a reduction in benefits  For example, using 2013 data, PBGC estimated 21 percent of more than 59,000 selected participants in insolvent multiemployer plans then receiving financial assistance from PBGC faced a benefit reduction  The proportion of participants facing reductions due to the statutory guarantee limits is expected to increase  About 51 percent of almost 20,000 selected participants in plans that PBGC believed would require future assistance were projected to face a benefit reduction  Since 2013, the deficit in PBGC’s multiemployer program has increased by nearly 700 percent, from a deficit of $8 3 billion at the end of fiscal year 2013 to $65 1 billion at the end of fiscal year 2017  PBGC estimated that at of the end of 2016, the present value of net new claims by multiemployer plans over the next 10 years would be about $24 billion, or approximately 20 percent higher than its 2015 projections  The program is projected to become insolvent within approximately 8 years  If that happens, participants who rely on PBGC guarantees will receive only a very small fraction of current statutory guarantees  According to PBGC, most participants would receive less than $2,000 a year and in many cases, much less  We have identified PBGC’s insurance programs as high-risk  This designation was made in part because multiemployer plans that are currently insolvent, or likely to become insolvent in the near future, represent a significant financial threat to the agency’s insurance program  We designated the single-employer program as high-risk in July 2003, and added the multiemployer program in January 2009  Both insurance programs remain on our high-risk list  Multiemployer Pension Plan Amendments Act of 1980 Among other things, the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA) made employers liable for a share of unfunded plan benefits when they withdraw from a plan, unless otherwise relieved of their liability, and strengthened certain funding requirements  An employer that chooses to withdraw from a multiemployer plan may be required to continue to contribute if the plan does not have sufficient assets to cover the plan’s current and known future liabilities at the time the employer withdraws; however, these payments may not fully cover the withdrawing employer’s portion of the plan’s liabilities  In such cases, the employers remaining in the plan may effectively assume the remaining liability  The Pension Protection Act of 2006 The Pension Protection Act of 2006 (PPA) was intended to improve the funding of seriously underfunded multiemployer plans, among other things  It included provisions that require plans in poor financial health to take action to improve their financial condition over the long term and established two categories of troubled plans: (1) “endangered status” or “yellow zone” plans (this category also includes a sub-category of “seriously endangered”), and (2) more seriously troubled “critical status” or “red zone” plans  PPA further required plans in the endangered and critical zones to develop written plans to improve their financial condition, such as by revising benefit structures, increasing contributions, or both, within a prescribed time frame  Multiemployer plans in yellow or red zone status must document their remediation strategies in a written plan, notify plan participants, and report annually on whether scheduled progress has been made  Since the 2008 market decline, the number of participants in endangered and critical plans has generally been decreasing (see fig  4)  The Multiemployer Pension Reform Act of 2014 In response to the funding crisis facing PBGC and multiemployer pension plans, the Multiemployer Pension Reform Act of 2014 (MPRA) made changes to the multiemployer system that were intended to improve its financial condition  Key changes included: Creation of critical and declining status  MPRA created a new category, “critical and declining,” for plans in critical status projected to become insolvent during the current plan year or within any of the 14 succeeding plan years, or in certain circumstances, within any of the 19 succeeding plan years  In 2017, PBGC reported that more than 100 multiemployer plans (more than 7 percent of plans) representing approximately 1 million participants (about 10 percent of participants) have been determined to be “critical and declining ” Permitted reduction of accrued benefits  MPRA permits plans to reduce participants’ and beneficiaries’ accrued retirement benefits if the plan can demonstrate such action is necessary to remain solvent  Plans apply to Treasury for the authority to reduce benefits  Treasury, in consultation with PBGC and DOL, reviews the applications and determines whether the proposed changes would enable the plan to remain solvent  Increased PBGC premiums  MPRA also increased the PBGC premiums for multiemployer plans from $12 to $26 (per participant per plan year) in 2015 and from $26 to $28 in plan year 2017  The annual premium in subsequent years is indexed to changes in the national average wage index  Creation of new framework of rules for partition  Partition allows a multiemployer plan to split into two plans—the original and a successor  Partitions are intended to relieve stress on the original plan by transferring the benefits of some participants to a successor plan funded by PBGC and to help retain participant benefits in the plans at levels higher than the PBGC-guaranteed levels  At the time the consent decree was established in 1982, CSPF had less than half the estimated funds needed to cover plan liabilities (and to pay associated benefits over the lifetime of participants) and it has not attained 100 percent of its estimated funding need since then, according to regulatory filings  CSPF’s 1982 Form 5500 we reviewed shows that the plan was less than 40 percent funded prior to the consent decree becoming effective  Over the next two decades, the plan generally made progress toward achieving its targeted level of funding but was never more than 75 percent funded, and funding has generally deteriorated since its 2002 filing (see fig  5)  Overall, the plan’s unfunded liability increased by approximately $11 2 billion (in inflation-adjusted dollars) between January 1983 and January 2016  As a consequence, participant benefits were never fully secured by plan assets over this period, as measured by ERISA’s minimum funding standards, and the plan consistently needed to collect contributions in excess of those needed to fund new benefit accruals to try to make up for its underfunded status  CSPF officials and other stakeholders identified several factors that contributed to CSPF’s critical financial condition and reflect the challenges faced by many multiemployer plans  For example, like CSPF, many multiemployer plans have experienced financial difficulties due to a combination of investment losses and insufficient employer contributions  In addition to being underfunded prior to the consent decree going into effect, stakeholders identified other specific factors that contributed to CSPF’s critical financial condition, such as trends within the national trucking industry and its workforce, funding challenges and common investment practices of multiemployer plans, and the impact of market downturns on long-term investment performance  Stakeholders also described the effects of the 2007 withdrawal of a key employer, United Parcel Service (UPS), on CSPF’s critical financial condition  Stakeholders we interviewed said changes to the workforce, such as declining union membership rates and changes resulting from industry deregulation, affected CSPF and some other multiemployer plans by reducing the number of workers able to participate in their plans  While the multiemployer structure distributes bankruptcy risk across many employers, for any particular multiemployer plan employers are often concentrated in the same industry, making the plans vulnerable to industry- specific trends and risks  For example, stakeholders noted the impact that the Motor Carrier Act of 1980 had on the trucking industry  Specifically, deregulation of the trucking industry reduced government oversight and regulation over interstate trucking shipping rates  The trucking industry became increasingly dominated by nonunion trucking companies resulting in the bankruptcy of many unionized trucking companies, according to stakeholders  New trucking companies typically did not join multiemployer plans because their labor force was not unionized and this, coupled with the bankruptcy of many contributing employers, contributed to a decrease in active participant populations for many plans serving the industry  As the total number of active participants in a plan declines, the resources from which to collect employer contributions declines proportionally  Stakeholders also said these changes were unforeseeable  Limitations on a plan’s ability to increase contributions mean that a plan has less capacity to recover from an underfunded position or to make up for investment returns that fall short of expectations  A decline in the number of active workers can also accelerate plan “maturity,” as measured by the ratio of nonworking to working participants  Plan maturity has implications for a plan’s investment practices and the time frame over which the plan must be funded  According to PBGC’s data for the multiemployer plans it insures, there were approximately three active participants for every nonworking participant in 1980 (3:1); by 2014, the ratio was approximately one active worker for every two nonworking participants (1:2)  Figure 6 shows the change in the percentages of active and nonworking participants for the multiemployer plans that PBGC insures  CSPF saw an even more dramatic change in its active to nonworking participant ratio from 1982 through 2015  In 1982, there were more than two active workers for every nonworking participant (2:1) and by 2016 that ratio had fallen to approximately one active worker for every five nonworking participants (1:5) (see fig  7)  Because CSPF’s contributing employers were largely trucking companies, stakeholders said this made the fund especially vulnerable to industry-wide shocks  Like the industry as a whole, CSPF was unable to attract new employers to replace exiting employers, in part because of the lack of new unionized employers  CSPF officials said that changes to the trucking industry and its workforce also led to other challenges for the plan  For example, contributions to the plan declined with the shrinking number of active workers  CSPF officials told us they could not significantly increase the contribution rate paid by remaining employers because of the financial hardship it would cause, and as a result, the plan’s ability to recover from its underfunded position was limited  CSPF officials said that this increased the plan’s reliance on investment returns to try to close the gap between its assets and liabilities  Stakeholders we interviewed cited challenges inherent in multiemployer plans’ funding and investment practices, and described how the challenges may have contributed to the critical financial condition of some plans, including CSPF  Stakeholders said that CSPF and many other multiemployer plans have been challenged by employer withdrawals  An employer withdrawal reduces the plan’s number of active worker participants, thereby reducing its contribution base and accelerating plan maturity  A withdrawing employer generally must pay a share of any unfunded benefits  Stakeholders identified several ways in which the withdrawal liability framework could result in a withdrawing employer underpaying its share of an unfunded liability  We have previously reported on the challenges associated with withdrawal liability, including: withdrawal liability assessments are often paid over time, and payment amounts are based on prior contribution rates rather than the employer’s actual withdrawal liability assessment  withdrawal liability payments are subject to a 20-year cap, regardless of whether an employer’s share of unfunded benefits has been fully paid within this 20-year timeframe; plans often did not collect some or all of the scheduled withdrawal liability payments because employers went bankrupt before completing their scheduled payments; and fears of withdrawal liability exposure increasing over time could be an incentive for participating employers to leave a plan and a disincentive for new employers to join a plan; Stakeholders we interviewed also added that the calculation used to determine withdrawal liability may use an investment return assumption that inherently transfers risk to the plan  When exiting employers do not pay their share of unfunded benefits, any remaining and future employers participating in the plan may effectively assume the unpaid share as a part of their own potential withdrawal liability as well as responsibility for the exiting employer’s “orphaned” participants  Participating employers may negotiate a withdrawal if they perceive a risk that the value of their potential withdrawal liability might grow significantly over time  In its MPRA application, CSPF cited employer withdrawals and bankruptcies as a significant challenge for the plan  CSPF reported that after deregulation, the number of contributing employers dropped by over 70 percent  While some of the drop could be due to the consolidation of trucking companies after deregulation, CSPF officials cited several cases in which employers went bankrupt or withdrew from the plan, which reduced the plan’s contribution base and accelerated its maturity  Additionally, when employers went bankrupt, they often did not pay their full withdrawal liability  For example, CSPF said two of its major contributing employers left the plan between 2001 and 2003, and left $290 million of more than $403 million in withdrawal liability unpaid after they went bankrupt  Stakeholders identified funding timeframes as a factor that contributed to the challenges facing many multiemployer plans, including CSPF  ERISA’s minimum funding standards have historically allowed multiemployer plans to amortize, or spread out the period of time for funding certain events, such as investment shortfalls and benefit improvements  For example, CSPF began a 40-year amortization of approximately $6 1 billion in underfunding on January 1, 1981, giving the plan until the end of 2021 to fully fund that amount  Longer amortization periods increase the risk of plan underfunding due to the number and magnitude of changes in the plan’s environment that may occur, such as a general decline in participants or deregulation of an industry  The Pension Protection Act of 2006 shortened amortization periods for single- employer plans to 7 years and the amortization periods for multiemployer plans to 15 years  Shorter amortization periods provide greater benefit security to plan participants by reducing an unfunded liability more rapidly  In addition, shorter amortization periods can be better aligned with the projected timing of benefit payments for a mature plan  However, shorter periods can be a source of hardship for plans with financially troubled contributing employers because they may require higher contributions  According to CSPF officials, CSPF requested and received an additional 10-year amortization extension from the IRS in 2005 after relating that contribution requirements could force participating employers into bankruptcy  One CSPF representative said an amortization extension can also help avoid subjecting the plan’s employers to IRS excise taxes for failing to make required minimum contributions  Stakeholders we interviewed said that certain common investment practices may have played a role in the critical financial condition of CSPF and other mature and declining plans  In general, multiemployer plans invest in portfolios that are expected, on average, to produce higher returns than a low-risk portfolio, such as one composed entirely of U S  Treasury securities  Stakeholders also stated that these investment practices may have been too risky because returns can be more volatile, and the higher expected returns might not be achieved  In addition, the Congressional Budget Office has reported that if “plans had been required to fund their benefit liabilities—at the time those liabilities were accrued—with safer investments, such as bonds, the underfunding of multiemployer plans would have been far less significant and would pose less risk to PBGC and beneficiaries ” Stakeholders also told us that for mature plans like CSPF, these investment practices can pose further challenges  Mature plans, with fewer active employees, have less ability to recoup losses through increased contributions and have less time to recoup losses through investment returns before benefits must be paid  Market corrections, such as those that occurred in 2001 through 2002 and in 2008, can be particularly challenging to mature plans and their participants, especially if a mature plan is also significantly underfunded  Mature plans could mitigate these risks by investing more conservatively, however, the resulting lower expected returns from more conservative investing necessitates higher funding targets and contribution rates, which could be a hardship for employers in an industry with struggling employers  Alternatively, a plan that invests more conservatively may provide lower promised benefits to accommodate the level of contributions it can collect  Lower investment returns from a more conservative investment policy would cost employers more in contributions and could potentially result in employers leaving the plan  Further, investing in a conservative portfolio would be relatively unique among multiemployer plans, and stakeholders said plan managers may feel they are acting in a prudent fashion by investing similarly to their peers  Underfunded plans like CSPF may not see conservative investment as an option if they cannot raise the contributions necessary to fully fund their vested benefits  Officials from CSPF told us that, because they lacked the ability to significantly increase revenue or decrease accrued benefits, the named fiduciaries sought incrementally higher investment returns to meet funding thresholds required by the amortization extension they received in 2005  On the other hand, there are challenges associated with risk bearing investments  In our prior work, we reported that multiemployer plans generally develop an assumed average rate of investment return and use that assumption to determine funding targets, required contributions, and the potential cost of benefit improvements  Experts we interviewed for that report told us that using a portfolio’s expected return to value the cost of benefits increases the risk that insufficient assets could be on hand when needed  They also told us that using the portfolio’s expected return to calculate liabilities could incentivize plans to invest in riskier assets and to negotiate higher benefit levels because the higher returns expected from riskier portfolios can result in lower reported liabilities  Plan Terms Set through Collective Bargaining Stakeholders we interviewed said that plan terms, such as contribution rates, which are set through the collective bargaining process, can create an additional challenge for multiemployer plans  Employers in multiemployer plans generally are not required to contribute beyond what they have agreed to in collective bargaining, and these required employer contributions generally do not change during the term of a collective bargaining agreement  CSPF officials said that up until the early 2000s, plan officials did not request modifications to collective bargaining agreements, such as reallocating contribution dollars, to respond to adverse investment returns  Stakeholders highlighted the effects of market downturns on multiemployer plan assets as another contributing factor to CSPF’s critical financial condition and that of other multiemployer plans  Failure to achieve assumed returns has the effect of increasing unfunded liabilities  For the multiemployer system in aggregate, the average annual return on plan assets over the 2002 to 2014 period was about 6 1 percent, well short of typical assumed returns of 7 0 or 7 5 percent in 2002  Many multiemployer plans were especially impacted by the 2008 market downturn  PBGC estimated that from 2007 to 2009, the value of all multiemployer plan assets fell by approximately 24 percent, or $103 billion, after accounting for contributions to and payments from the plans  Although asset values recovered to some extent after 2009, some plans continued to be significantly underfunded, and stakeholders said this could be due to the contribution base not being sufficient to help recover from investment shortfalls  CSPF’s investment performance since 2000 has reflected performance similar to other multiemployer plans and the plan went from 73 percent funded in 2000 to about 38 percent funded in 2017  While the plan used an assumed rate of return of 7 5 to 8 0 percent per year between 2000 and 2014, our analysis of the plan’s regulatory filings shows that the plan’s weighted-average investment return over this period was about 4 9 percent per year  CSPF officials said the 2008 downturn significantly reduced CSPF’s assets and it was unable to sufficiently recoup those losses when the market rebounded in 2009  Plan assets declined from $26 8 billion at the beginning of 2008 to $17 4 billion at the beginning of 2009, with $7 5 billion of the decline attributable to investment losses  Despite reporting a 26 percent return on assets during 2009, CSPF had only $19 5 billion in assets at the end of 2009 because benefits and expenses exceeded the contributions it collected and because it had fewer assets generating returns for the plan  By the end of 2009, CSPF’s funding target was $35 9 billion but the fund had less than $20 billion that could be used to generate investment returns  If CSPF’s portfolio had returned 7 5 percent per year over the 2000-2014 period, instead of the approximately 4 9 percent we calculated, we estimate that the portfolio value would have exceeded $32 0 billion at the end of 2014, or 91 percent of its Actuarial Accrued Liability  In addition to the factors mentioned that affected many multiemployer plans, stakeholders we interviewed also noted the unique effect of the UPS withdrawal on CSPF  In 2007, UPS negotiated with the International Brotherhood of Teamsters for a withdrawal from CSPF and paid a withdrawal liability payment of $6 1 billion  This payment was invested just prior to the 2008 market downturn  Moreover, the loss of UPS, CSPF’s largest contributing employer, reduced the plan’s ability to collect needed contributions if the plan became more underfunded  A UPS official said that, following the market decline of 2001-2002, the company considered whether it should withdraw from all multiemployer plans because it did not want to be the sole contributing employer in any plan  According to this official, UPS considered the large number of UPS employees in CSPF and the plan’s demographics—such as an older population and fewer employers—in its decision to withdraw  CSPF officials said they did not want UPS to withdraw because its annual contributions accounted for about one-third of all contributions to the plan  CSPF officials also told us that, prior to the UPS withdrawal, they had expected the population of active UPS workers in the plan to grow over time  UPS’ withdrawal of 30 percent of CSPF’s active workers, in combination with the significant market downturn just after UPS withdrew, reflected the loss of working members and investment challenges on a large scale  Additionally, stakeholders noted that although each of the factors that contributed to CSPF’s critical financial condition individually is important, their interrelated nature also had a cumulative effect on the plan  Industry deregulation, declines in collective bargaining, and the plan’s significantly underfunded financial condition all impaired CSPF’s ability to maintain a population of active workers sufficient to supply its need for contributions when investment shortfalls developed  Given historical rules for plan funding and industry stresses, CSPF was unable to capture adequate funding from participating employers either before or after they withdrew from the plan  The plan’s financial condition was further impaired when long-term investment performance fell short of expectations  For an underfunded, mature plan such as CSPF, the cumulative effect of these factors was described by some stakeholders as too much for CSPF to overcome  There have been three distinct periods related to CSPF’s investment policy after the original consent decree took effect: the early period, from the consent decree’s effective date in September 1982 through October 1993, during which named fiduciaries set different investment policies and sold many of CSPF’s troubled assets—mostly real estate; a middle period from November 1993 through early 2017, during which CSPF’s investment policies were consistently weighted towards equities and its asset allocation varied, with notable equity allocation increases occurring from year-ends 1993-1995 and 2000-2002; and the current period, starting in January 2017, during which named fiduciaries and CSPF trustees are moving assets into fixed income ahead of insolvency  Appendix I has a detailed timeline that includes changes to CSPF’s investment policies since the consent decree was established in 1982  The original consent decree placed exclusive responsibility for controlling and managing the plan’s assets with an independent asset manager, called a named fiduciary  Additionally, the original consent decree prohibited CSPF trustees from managing assets or making investment decisions and gave a single named fiduciary the authority to set and change the plan’s investment objectives and policies, subject to court approval (see fig  8)  During this period, two successive named fiduciaries—first Equitable Life Assurance Society of the United States (Equitable) and then Morgan Stanley—set and executed the plan’s investment objectives using similar investment philosophies, but differing investment return goals and target asset allocations (see fig  9)  Both named fiduciaries planned to sell the plan’s troubled real estate assets from the pre-consent decree era  They also limited nonpublicly traded investments to 35 percent of the plan’s assets and set broad allocation targets for new real estate, fixed income, and equity assets  In 1984, Morgan Stanley considered a dedicated bond portfolio in its capacity as the plan’s named fiduciary, but after review, Morgan Stanley decided similar results could be obtained through other investment strategies  In executing these policies, the plan’s asset allocation varied from year to year  Starting in 1987 and in subsequent years during the early period, Morgan Stanley invested a majority of the plan’s assets in fixed income assets—more than half of which were passively managed—and all equity assets were allocated to domestic equity through 1992  By 1989, CSPF officials reported that nearly all troubled real estate assets had been sold and Morgan Stanley’s responsibilities and risk of potential fiduciary liability were reduced, permitting a concomitant reduction in fees paid to the named fiduciary (see fig  10)  During the middle period, CSPF’s investment policy was broad and consistently directed that asset allocations be weighted toward equities  In 1993, Morgan Stanley revised its investment policy statement for CSPF to eliminate asset allocation targets for each asset class and instead specified that the plan invest a majority of assets in equity or equity-type securities and no more than 25 percent in nonpublicly traded assets  After 1999, CSPF’s investment policy under other, successive named fiduciaries continued to be broad and generally specified that the plan should invest a majority of assets in equity or equity-type securities  Specifically J P  Morgan’s and Northern Trust’s consecutive investment policies for part of the plan’s assets continued to specify that a majority of the plan’s assets be invested in equity or equity-type securities and no more than 15 percent be invested in nonpublicly traded assets  Goldman Sachs’ investment policy for another part of the plan’s assets did not specify asset allocation details but indicated slightly higher tolerance for risk in conjunction with its equity portfolio  CSPF trustees said that named fiduciaries considered investing in alternative assets, but instead chose to increase the plan’s allocation to equity assets  The named fiduciaries’ investment policies did not vary significantly over this period because CSPF officials said that the plan’s overarching investment objective of achieving full funding did not change, even though there were key changes to the plan’s investment management structure during this time period  Specifically, starting in 1999, the plan temporarily shifted to a dual named fiduciary structure and increased its use of passively-managed accounts—both described in detail below— changing the named fiduciary structure that had been in place since the original consent decree (see fig  11)  More specifically, the two key changes to the plan’s investment management structure were: A temporary shift to a dual named fiduciary structure  Effective in 1999, CSPF proposed and the court approved allocating plan assets between two named fiduciaries instead of one in order to diversify CSPF’s investment approach, among other things  Both named fiduciaries were in charge of setting and executing separate policies for plan assets they managed—called “Group A” and “Group B” assets—irrespective of the other named fiduciary’s allocations  During this time, the two named fiduciaries were J P  Morgan/Northern Trust and Goldman Sachs  Specifically, J P  Morgan was named fiduciary between 2000 and 2005 and Northern Trust between 2005 and 2007 for “Group A” assets  Goldman Sachs was named fiduciary for “Group B” assets between 2000 and 2010  In 2010, an investment consultant found the performance of two named fiduciaries under the dual named fiduciary structure had been similar and more expensive than it would be under a proposed move back to a single named fiduciary  Accordingly, CSPF officials proposed, and the court approved, consolidation of all assets allocated to named fiduciaries in August 2010, with Northern Trust as the plan’s single named fiduciary  An increased use of passively-managed accounts  Between 2003 and 2010, the portion of assets that named fiduciaries managed declined as the plan moved 50 percent of its assets into three passively-managed accounts  Specifically, in 2003, 20 percent of CSPF’s assets were transitioned into a passively-managed domestic fixed income account to lower the plan’s investment management fees  In addition, both of the named fiduciaries reported that they had not outperformed the industry index for the domestic fixed income assets they managed after they were approved as named fiduciaries in 1999 and 2000 through February 2003  Similarly, in 2007 and 2010, CSPF officials said that two more passively-managed accounts were created to further reduce plan fees  Specifically, in 2007, 20 percent of plan assets were moved into a passively-managed domestic equity account  Then, in 2010, an additional 10 percent of the plan’s assets were allocated to passively-managed accounts—5 percent were allocated to a new passively-managed international equity account and 5 percent were added to the passively-managed domestic equity account  CSPF officials and named fiduciary representatives also said that the plan’s investment policies did not change in response to a couple of the events that contributed to CSPF’s critical financial condition  For example, when UPS withdrew from the plan in December 2007, it paid $6 1 billion in a lump sum to fulfill its withdrawal liability  Consistent with the named fiduciaries’ investment policies during this time period, the majority of this withdrawal payment was invested in equity assets  Specifically, the court approved the UPS withdrawal liability payment to be allocated: $1 billion to Northern Trust to be invested primarily in short-term fixed income assets, $0 9 billion to the passively-managed domestic fixed income account, and $4 2 billion to partially fund the newly created passively- managed domestic equity account  As a result of the 2008 market downturn, the balance of each of CSPF’s accounts—Northern Trust’s named fiduciary account, the passively-managed domestic fixed income and domestic equity accounts, and Goldman Sachs’ named fiduciary account—declined because of investment losses or withdrawals from investment assets to pay benefits and expenses  Some of the declines in each account were reversed by investment gains in 2009  Although the changes made to CSPF’s investment management structure did not lead to investment policy changes during the middle period, they altered the process by which the policy was set and executed  In particular, trustee responsibilities in the policy process grew after CSPF trustees became responsible for developing investment policy statements and selecting and overseeing managers of the passively-managed accounts, subject to court approval  In addition, CSPF officials said the addition of passively-managed accounts between 2003 and 2010 had the effect of creating broad bounds within which the named fiduciary could set the plan’s asset allocation  For example, when the plan moved 20 percent of total plan assets into the passively-managed domestic fixed income account in 2003, this placed an upper bound on the plan’s total equity allocation at 80 percent  Similarly, since 2010 the 30 percent of total plan assets in passively-managed equity accounts has placed a lower bound on the plan’s total equity allocation at 30 percent (see fig  12)  Nevertheless, named fiduciaries maintained the largest role in setting and executing CSPF’s investment policy throughout the middle period  From 1993 to 2003, named fiduciaries managed all of the plan’s investment assets, and from 2003 to 2009, when the plan added two of the current passively-managed accounts, named fiduciaries still held the majority of the plan’s assets  It has only been since 2010 that the assets in passively-managed accounts equaled those managed by the named fiduciary  Furthermore, Northern Trust representatives said they considered the plan’s allocations to passively-managed accounts when developing the objectives and target asset allocations for the assets they managed  Northern Trust representatives also said they discussed the plan’s overall asset allocation with trustees, but the trustees, and ultimately the court, were responsible for the decision to move 50 percent of the plan’s assets into passively-managed accounts  After the 1993 policy change that specified the plan would invest a majority of assets in equity or equity-type securities, CSPF’s asset allocation changed significantly  For example, during the middle period the plan’s allocation to equities increased from 37 percent at the end of 1993 to 69 percent at the end of 2002, and its allocation to cash plus fixed income decreased from 63 percent at the end of 1993 to 27 percent at the end of 2002  In particular, Morgan Stanley increased the plan’s allocation to equity assets from 37 percent at the end of 1993 to 63 percent at the end of 1995, with the percentage in equities almost or above 50 percent through the end of 1999  From 1993 through 1999, Morgan Stanley generally decreased the plan’s allocation to fixed income assets and increased its allocation to international equity (reaching a high of about 28 percent of the plan’s assets in 1995), an asset class in which the plan had not previously invested (see fig  13)  After 1999, the plan’s asset allocation continued to be weighted towards equities  After the market downturn in 2001, CSPF trustees told us that J P  Morgan and Goldman Sachs explicitly increased the equity allocation in an attempt to generate higher investment returns and increase the plan’s funded ratio—the plan’s overarching investment objective  Between 2000 and mid-2010, when the plan had two named fiduciaries, equity assets increased from about 58 percent at the end of 2000 to between 66 and 70 percent at the end of 2001 and each year thereafter until the end of 2009, mostly based on the named fiduciaries’ decisions to increase the plan’s allocation to domestic equity assets  When Northern Trust became the sole named fiduciary in 2010, the proportion of equity assets declined from almost 72 percent at the end of 2010 to almost 63 percent at the end of 2016  During this time, Northern Trust generally decreased the plan’s allocation to domestic equity assets, increased the allocation to actively-managed fixed income, and started investing in global infrastructure assets  Northern Trust representatives said CSPF’s recent portfolio had been kept relatively aggressive in an attempt to achieve the returns the plan would need to become fully funded while balancing risk (see fig  14)  CSPF’s deteriorating financial condition precipitated a recent investment policy change that will move plan assets into fixed income and cash equivalent investments ahead of projected insolvency  In early 2017, Northern Trust representatives revised the plan’s investment policy because they, in consultation with the trustees, believed the plan had no additional options to avoid insolvency (see textbox)  This change to the plan’s outlook led to a significant change in the plan’s investment objective, from a goal of fully funding the plan to instead forestalling insolvency as long as possible while reducing the volatility of the plan’s funding  Northern Trust representatives and CSPF officials revised applicable plan investment policy statements and started to gradually transition the plan’s “return seeking assets”—such as equities and high yield and emerging markets debt—to high quality investment grade debt and U S  Treasury securities with intermediate and short-term maturities  Northern Trust’s new investment policy specified the assets under its control would not be invested in nonpublicly traded securities, in order to manage risk and provide liquidity  CSPF Has Limited Options to Achieve Solvency As of March 2018, the Central States, Southeast and Southwest Areas Pension Fund (CSPF) was projected to be insolvent on January 1, 2025  As of July 2017, CSPF officials said that the following measures (in isolation) could help the plan avoid insolvency: 18 percent year-over-year investment returns (infinite horizon), or 250 percent contribution increases (with no employer attrition), or 46 percent across-the-board benefit cut  However, CSPF officials said that investment returns and contribution increases of these magnitudes were untenable, and CSPF’s application to reduce accrued benefits under the Multiemployer Pension Reform Act of 2014 (MPRA) was denied in 2016  CSPF officials and Northern Trust representatives said these asset allocation changes are intended to provide participants greater certainty regarding their benefits and reduce the plan’s exposure to market risk and volatility until it is projected to become insolvent on January 1, 2025 (see fig  15)  Northern Trust is expected to continue to manage 50 percent of the plan’s investment assets until the plan becomes insolvent  While the total amount of assets in the passively-managed accounts will continue to constitute 50 percent of the plan’s assets, the trustees plan to transfer assets from the passively-managed domestic and international equity accounts into the passively-managed domestic fixed income account, which will be gradually transitioned to shorter-term or cash-equivalent fixed-income securities sometime before the end of March 2020 (see fig  16)  CSPF officials said the changes will reduce the amount of fees and transaction costs paid by the plan  Specifically, investment management fees are expected to generally decrease as the plan moves into shorter duration fixed income assets  In addition, Northern Trust’s plan is designed to reduce transaction costs in two ways: (1) in the near term, Northern Trust plans to liquidate “return-seeking assets” so the cash it receives can be used directly to pay benefits, and (2) it plans to synchronize the fund’s benefit payments with the maturity dates of fixed income assets it purchases so cash received can be used directly to pay benefits  Both of these design features are intended to eliminate the need to reinvest assets, which might entail additional transaction costs  Our analysis of available data from several different sources shows the returns on CSPF’s investments and the fees related to investment management and other plan administration activities appear generally in line with similar pension plans or other large institutional investors of similar size  The annual returns on CSPF’s investments in recent decades have generally been in line with the annual returns of a customized peer group provided by the investment consultant Wilshire  The comparison group data is from Wilshire’s Trust Universe Comparison Service (TUCS)—a tool used by CSPF to compare its investment returns to a group of peers  Over the 22 years covered by our analysis, CSPF’s returns were above the median in 12 years and below the median the other 10  Figure 17 illustrates how CSPF’s annual investment returns compare to CSPF’s customized peer group of master trusts with over $3 billion in assets  CSPF’s annual investment returns tended to fluctuate relative to the annual median of the TUCS peer group over the 1995 through 2016 period  For example, in 14 of the 22 years analyzed, its annual return was in the highest or lowest 25 percent of returns (7 years each)  Further, in 3 years, its investment returns fell either within the top 5 percent of returns (1996, 2009) or bottom 5 percent (1998)  In 8 of the 22 years, CSPF’s annual return was within the middle 50 percent of its TUCS peer group  The TUCS data we analyzed also included median portfolio allocations for the group of CSPF’s peers  Table 2 compares CSPF’s asset allocations for selected asset categories to the median allocations of its TUCS comparator group  In 1996, compared to the TUCS medians, CSPF had relatively lower proportions of its assets in both equities and fixed income and a relatively higher proportion in real estate  Twenty years later (2016), CSPF had relatively higher proportions of its assets in both equities and fixed income (about 15 and 7 percentage points, respectively) than the respective medians for its peer group  However, the relatively large difference between CSPF’s 2016 equity allocation and the median allocation of its peer group may be a result of the peers moving into different asset classes  For example, there is a relatively large difference, in the other direction, in the allocation to alternative investments (see table 2)  We did not identify an alternative asset category in CSPF’s asset reports for 2016, but the TUCS comparator group median asset allocation in that year is 11 8 percent of assets  Similar to our findings when comparing the returns on CSPF’s investments to a customized peer group of other large institutional funds, the annual returns on CSPF’s investments in recent decades have also generally been in line with the annual returns for a group of similar multiemployer pension plans  To create a group of comparable plans, we selected plans that had a similar degree of “maturity” to CSPF in 2000, as such plans may face similar cash flow challenges to those facing CSPF  This comparator group ultimately consisted of 15 plans in addition to CSPF  Relative to less mature plans, mature plans generally have a greater proportion of liabilities attributable to retired participants receiving benefit payments and a lower proportion attributable to active participants (i e , workers) earning benefits  Mature plans may have limited capacity to make up for insufficient investment returns through employer contributions  Similar to the comparison against other large institutional fund returns based on TUCS data, our comparison against other mature multiemployer plan returns based on Form 5500 data shows that CSPF’s annual returns fluctuate relative to the median annual return for the mature plan comparator group (see fig  18)  For example, in 12 of the 15 years, CSPF’s annual return was in the highest or lowest 25 percent of returns (7 times high and 5 times low)  In 3 of the 15 years analyzed, CSPF’s annual return fell within the middle 50 percent of the peer group  Overall, from 2000 to 2014, CSPF’s annual return was above the group median return in 9 of the 15 years—and lower than the median return in the other 6 years  Relative to its peers, CSPF’s annual returns performed worst during economic downturns and best in years coming out of such downturns  CSPF’s annual investment return was in the bottom 10 percent of returns in 2001, 2002, and 2008  Alternatively, its annual return was in the top 10 percent of returns from 2003 to 2006, in 2009, and in 2012  Additionally, the dollar-weighted average annual return for CSPF over the 2000 through 2014 period was roughly the same as the median for the mature plan comparison group  Specifically, the dollar-weighted average annual return over this period for CSPF was roughly 4 9 percent, while the median dollar-weighted average annual return over this period among the comparison plans with continuous data was 4 8 percent  Our analysis of investment returns for mature plans compares investment returns for a set of peers that includes only multiemployer defined benefit plans  However, as with the comparison against other large institutional funds, the comparisons against other mature plans are not measures of over- or under-performance relative to an index or benchmark  Similarly, as with the earlier comparison, the analysis does not account for variations in the levels of investment risk taken by the plans  Our analysis of Form 5500 data shows CSPF’s investment fees and administrative expenses were in line with other large multiemployer plans  Plan investment fees and administrative expenses are often paid from plan assets so many plans seek to keep these fees and expenses low  Additionally, investment fees are likely to be related to the value of assets under management, and plans with greater asset values tend to be able to negotiate more advantageous fee rates  According to a pension consultant and a DOL publication, investment management fees are typically a large defined benefit plan’s largest category of expense, but a pension plan also incurs a number of lesser expenses related to administering the plan  Administrative expenses (other than investment fees) may include those for: audit and bookkeeping/accounting services; legal services to the plan (opinions, litigation and advice); administrative services provided by contractors; plan staff salaries and expenses; plan overhead and supplies; and other miscellaneous expenses  These administrative expenses relate to plan operations beyond the management of the assets, including the day-to-day expenses for basic administrative services such as participant services and record keeping  Furthermore, some of these expenses can vary based on the number of participants in the plan  To compare CSPF’s fees and expenses against similarly sized plans, we tallied various investment fee-related and other administrative expenses and compared CSPF to a group of multiemployer defined benefit plans that were among the 19 largest plans in terms of assets as of January 1, 2014  According to CSPF’s 2014 Form 5500, CSPF spent about $46 5 million on investment fees (or $47 6 million in 2016 dollars) and had about $17 4 billion in assets (or $17 8 billion in 2016 dollars) as of the end of the year—resulting in an investment fee expense ratio of about 27 basis points, or 0 27 percent  Over the 2000 to 2014 period, CSPF’s average annual investment fee expense ratio was 34 basis points (0 34 percent) while the median of the averages for our large plan comparison group was 37 basis points (0 37 percent)  While CSPF’s average investment fee expense ratio was below the median for its comparison group over the period we examined, the relationship of CSPF’s annual ratio to the annual median changed over time  CSPF’s annual investment-fee expense ratio was consistently at or above the median from 2000 through 2006, but was below the median thereafter  In addition, CSPF’s average investment fee expenses over the period that followed 2006 were 26 percent less than the average over the period before 2007  (They averaged 39 basis points, or 0 39 percent, from 2000 through 2006 and 29 basis points, or 0 29 percent, from 2007 through 2014 ) Two events may have contributed to this change  First, CSPF introduced the passively-managed accounts beginning in 2003—as noted earlier, and CSPF moved certain assets to those accounts in an effort to reduce fees  Second, the change back to a single named fiduciary, which was suggested as an expense saving move, occurred in the middle of the 2007 to 2014 period analyzed  Figure 19 illustrates how CSPF’s investment fee expense ratio compares to other large plans  Our analysis uses investment fee data reported in the Form 5500 that does not include details about the sources of the fees  Investment fees may be sensitive to a plan’s particular investment strategy and the way assets are allocated  For example, with CSPF, a named fiduciary has responsibility for executing the investment strategy and allocations  According to a representative from Northern Trust—the current named fiduciary—CSPF pays a fee of about 5 basis points for named fiduciary services, and this, combined with investment management fees, is in line with investment fees for other clients (though the overall fees depend on the types of asset allocations and investment strategies)  Figure 20 shows how CSPF’s administrative (or non-investment) expenses compare to those of other large plans on a per participant basis  According to CSPF’s 2014 Form 5500, CSPF spent about $38 million on administrative expenses ($39 million in 2016 dollars)—the third most among the 20 peer plans  However, when these expenses are expressed relative to the number of plan participants, CSPF had per participant expenses of $98 in 2014, which is about 16 percent less than the median of the large comparator group, $117  Over the period studied, CSPF’s administrative expenses per participant were at or above the large comparator median in 3 years (2001, 2004, and 2005), but lower than the median in all other years of the 2000 to 2014 period  CSPF’s administrative expenses were also in line with a broader group of comparators  For example, PBGC reported on 2014 administrative expenses of a population of large multiemployer plans (plans with more than 5,000 participants)  By closely replicating the methodology of that study, we found CSPF’s expenses of $98 per participant in 2014 fell below the median expense rate of $124 dollars per participant but above the lowest quartile of this group of large multiemployer plans  In comparing administrative expenses as a percentage of benefits paid, we found CSPF’s administrative expenses were among the lowest 5 percent of this group of large multiemployer plans  We performed a similar comparison against the peer group of large plans  CSPF had the lowest administrative expense rate among the large plan peer group in 2014, paying administrative expenses at a rate of 1 4 percent of benefits paid  In addition, CSPF’s annual administrative expenses as a percentage of benefits were below the median of our peer group of large plans in all years we reviewed  Our analysis of administrative expenses is highly summarized and does not account for possibly unique sources of administrative expenses  Plans may have unique organizational structures and attribute expenses differently  For example, one plan may contract a significant portion of administrative duties with a third-party, while another plan may administer the plan in-house  According to an actuary we interviewed, most multiemployer plans are administered by a third-party, but the plan’s in- house staff will still retain a number of duties  Additionally, the amount of individual administrative expenses could vary significantly by plan depending on the importance of the related administrative function in the plan’s organization  We provided a draft of the report to the U S  Department of Labor, U S  Department of the Treasury, and the Pension Benefit Guaranty Corporation for review and comment  We received technical comments from the U S  Department of Labor and the Pension Benefit Guaranty Corporation, which we incorporated as appropriate  The U S  Department of the Treasury provided no comments  We will send copies to the appropriate congressional committees, the Secretary of Labor, the Secretary of the Treasury, Director of the Pension Benefit Guaranty Corporation, and other interested parties  This report will be available at no charge on the GAO website at http://www gao gov  If you or your staff have any questions about this report, please contact Charles Jeszeck at (202) 512-7215 or jeszeckc@gao gov or Frank Todisco at (202) 512-2700 or todiscof@gao gov  Mr  Todisco meets the qualification standards of the American Academy of Actuaries to address the actuarial issues contained in this report  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff who made key contributions to this report are listed in appendix IV  Our objectives were to review: (1) what is known about the factors that contributed to the Central States, Southeast and Southwest Areas Pension Fund’s (CSPF) critical financial condition; (2) what has been CSPF’s investment policy, and the process for setting and executing it, since the consent decree was established; and (3) how has CSPF performed over time, particularly compared to similar pension plans  For all objectives, we reviewed relevant federal laws and regulations, literature, and documentation the U S  Department of Labor (DOL) and CSPF officials provided, including reports prepared by the court- appointed independent special counsel  We interviewed knowledgeable industry stakeholders, participant advocates, CSPF officials, International Brotherhood of Teamsters officials and members, and federal officials— including officials from the Pension Benefit Guaranty Corporation (PBGC), DOL, and the U S  Department of the Treasury (Treasury)  To describe the major factors that led to CSPF’s critical financial condition, we conducted semi-structured interviews and reviewed CSPF documentation, relevant scholarly materials, trade and industry articles, government reports, conference papers, research publications, and working papers  We also collected actuarial, financial, and other data on current and historical measures of plan assets, liabilities, investment performance, and other factors, and performed our own analyses of these data  The data and documentation collected were generally from the plan or agencies that oversee pensions  We determined the information to be generally reliable for the purposes of our objectives  To describe CSPF’s investment policy and the process by which it was set and executed we (1) reviewed CSPF’s investment policy statements, court orders and consent decree amendments, and other documentation provided by CSPF officials; (2) interviewed CSPF officials, including pension plan staff, the board of trustees, and the investment advisor, and representatives of the named fiduciary serving the plan at the time of our review; and (3) summarized certain aspects of CSPF’s assets using year- end performance reports prepared by the named fiduciaries  To describe how CSPF has performed over time compared to similar pension plans, we analyzed investment and fee data from DOL’s Form 5500, the government’s primary source of pension information  We also examined CSPF’s investment returns in comparison to a customized Wilshire Associates’ (Wilshire) Trust Universe Comparison Service (TUCS) benchmark of trusts with $3 billion or more in assets  CSPF provided these data and the data are included in the independent special counsel reports  Wilshire provided supplemental data using the same benchmark specifications  We reviewed three types of documentation provided by CSPF for changes in named fiduciaries; changes in investment policy, strategy, and asset allocation; major issues that affected funding; and how these issues affected CSPF’s investment strategy and policy  Select independent special counsel reports  CSPF officials provided 4th quarter reports for each year from 1982 through 2002 and available quarterly reports from 2003 through 2007  We downloaded all available quarterly reports from 2008 through 2017 from CSPF’s website  Select board of trustee meeting minutes  We requested board of trustee meeting minutes from 1983, 1994-95, 1998-2005, 2007-2010, and 2016 so we could review trustee discussions from the first full year the plan was covered by the 1982 consent decree, the most recent full year; periods that included a recession and/or when the plan’s assets performed poorly; and periods that preceded a change or reappointment of the named fiduciary  CSPF officials selected portions of the trustee meeting minutes from those years that pertained to the following topics: named fiduciary reports concerning investment performance; discussions relating to the amortization extension the Internal Revenue Service (IRS) granted to the plan and the contribution rate increases the plan required of participating employers in an effort to comply with funding targets required as condition of the IRS-approved amortization extension; major amendments to the plan; significant reports concerning the plan’s financial condition; amendments to the consent decree; discussions relating to any inquiries or issues DOL raised; discussions of named fiduciary appointments or resignations; discussions of particularly significant contributing employer delinquencies, bankruptcies, and settlements; and discussions relating to the independent special counsel  In addition to the board of trustee meeting minutes, CSPF officials provided select documentation on similar topics a former secretary of the board of trustees retained (1995 through 2008)  Select correspondence between CSPF and DOL  CSPF officials provided select correspondence with DOL from 1987 through 2017 relating to DOL’s oversight of the plan  CSPF officials said they provided all records of those communications that related to significant, substantive, and nonroutine issues  The correspondence excluded other documents, such as periodic reports concerning asset rebalancing and correspondence related to fairly noncontroversial motions to the consent decree  In addition, DOL provided documentation throughout the course of our engagement, including documentation it provided between September and October 2017 that it had not previously identified as being relevant to our review  We completed an on-site file review at DOL in September 2017, and DOL sent us additional electronic documentation in September and October 2017  Overall, we reviewed extensive documentation from DOL—spanning over 10,000 pages of paper-based and electronic files— and spent substantial time cataloging and categorizing it  However, DOL officials reported that certain documentation related to CSPF was no longer available because it had only been retained for the time specified in the records retention policy of the relevant office  We conducted 23 semi-structured interviews with federal agency officials and other stakeholders, including affected parties, and persons knowledgeable about unions, participants and retirees, the trucking industry, collective bargaining agreements, and multiemployer pension plans  We also interviewed three stakeholders with actuarial expertise to specifically understand actuarial standards and procedures  We selected knowledgeable stakeholders based on review of literature and prior GAO work, and recommendations from other stakeholders  We judgmentally selected stakeholders whose expertise coincided with the scope of our objectives and who would be able to provide a broad range of perspectives  In our semi-structured interviews we asked about key factors affecting the plan, the broader regulatory and financial environment in which multiemployer plans operate, and solvency options for plans like CSPF  We reviewed CSPF’s investment policy statements after CSPF entered into a consent decree in 1982, most of which are documented in the consent decree or other court orders  Seven of the investment policy statements were developed by named fiduciaries in consultation with the plan’s board of trustees and four were developed by the trustees  (See fig  21 ) From each investment policy statement, we compiled relevant information on: (1) investment philosophy and plan characteristics considered in developing it, (2) investment return benchmarks, (3) asset allocation, and (4) strategies and assets  See table 3 for select asset allocation information  To describe how CSPF’s investment policy was executed, we compiled information from performance reports prepared by named fiduciaries  We reported CSPF’s asset allocation generally based on the aggregate asset allocation categories CSPF’s named fiduciaries assigned in those reports  CSPF provided these reports for the end of each year 1984 through 2016—except 1992 and 1995, for which it provided reports as of the end of November  Information we compiled included the plan’s: account breakdown (i e , assets in named fiduciary and passively- asset allocation; and investment assets withdrawn to pay benefits and administrative expenses  When possible, we checked the information from year-end performance reports against that in other sources  Specifically, to ensure we captured the vast majority of the plan’s assets in our asset summary we compared the total amount of plan assets named fiduciaries reported with Net Assets reported in CSPF’s Form 5500 filings, available from 1982 through 2016  We generally found these totals to be similar for each year—in most years the difference was about or under 1 percent  Also, named fiduciary performance reports included information on withdrawals from investment assets to meet pension and administrative expense obligations as of the end of each year, except for 1995 and 1999-present  For 1995 through 2016, we compiled this information from independent special counsel reports  For years in which we had overlapping information, 1996 through 1998, we found the reported totals were similar—no more than about 0 6 percent difference in each of those years  Based on our review we believe that the differences were insignificant to our overall analysis and did not impact our findings  To determine investment returns, investment fees, and administrative expenses for CSPF and related comparator group multiemployer defined benefit plans, we analyzed electronic Form 5500 information, the primary, federal source of private pension data  We analyzed information from 2000 through 2014, the most current and complete year at the time we performed our analysis  We began our analysis with 2000 data as data on investment returns and plan fees is primarily found in the Schedule H  Schedule H information was first collected in 1999  But we begin our analysis with 2000 data as electronic data became more reliable the year after the schedule was introduced  We have previously reported on the problems associated with the electronic data of the Form 5500  To mitigate problems associated with the data, we used Form 5500 research data from PBGC  PBGC analysts routinely and systematically correct the raw 5500 data submitted by plans, and PBGC’s Form 5500 research data are thought to be the most accurate electronic versions  Although we did not independently audit the veracity of the PBGC data, we took steps to assess the reliability of the data and determined the data to be sufficiently reliable for our purposes  For example, we performed computer analyses of the data and identified inconsistencies and other indications of error and took steps to correct inconsistencies or errors  A second analyst checked all computer analyses  Funded status is a comparison of plan assets to plan liabilities  One measure of funded status is the funded percentage, which is calculated by dividing plan assets by plan liabilities  Another measure of funded status is the dollar amount of difference between plan assets and plan liabilities; the excess of plan liabilities over plan assets is the unfunded liability (or surplus if assets exceed liabilities)  In this report, we measured funded status using the Actuarial Value of Assets and the Actuarial Accrued Liability, which are the basic measures used to determine the annual required minimum contribution for multiemployer plans under ERISA  We chose these measures because of the consistent availability of data for these measures  There are other ways to measure plan assets and plan liabilities  The Actuarial Value of Assets can be a “smoothed” value that differs from the market value of plan assets  The Actuarial Accrued Liability depends on the choice of actuarial cost method and discount rate, and on whether it is determined on an ongoing plan basis or a plan close-out basis  While different measures of plan assets and liabilities will produce different measures of funded status at any particular point in time, we found that our use of the Actuarial Value of Assets and the Actuarial Accrued Liability was sufficient for our purposes, which included examining the plan’s progress relative to statutory funding standards as well as its trend over time  We developed multiple comparison groups for our analysis  The general rationale behind these comparator groups is to identify plans with similar fundamental characteristics, such as plan size or plan maturity, for purposes of investment return and fee and expense comparisons  We created the following two comparator groups: 1  Large plans (in terms of assets)  We ordered multiemployer defined benefit plans by descending 2014 plan assets (line 2a of the 2014 of the Schedule MB)  Because one of our key analyses of the data involves comparing investment returns across plans, we also limited the comparable plans to those that share a common plan year to CSPF (specifically if they have the same plan year-end of December 31)  We selected the 20 plans that had the largest plan asset values  This includes CSPF, which was the second largest multiemployer plan as of the beginning of 2014  Because these comparator plans are among the largest, they should have similar cost advantages  For example, for investment management services, they should have similar advantages in obtaining lower fees and thus garner greater net returns due to the more favorable fee structures  2  Mature plans (in terms of retiree liability proportions)  We ordered multiemployer defined benefit plans by their similarity to CSPF’s ratio of retiree to total liabilities as of the beginning of calendar year 2000  The ratio of retiree to total liabilities is defined as line 2(b)1(3) of the 2000 Schedule B divided by total liabilities of line 2(b)4(3) of the 2000 Schedule B  To compare retiree to total liability ratios, we created a variable for the absolute value of the difference between CSPF’s ratio and that of a given plan  We ordered the plans by ascending differences in the ratios (excluding any with missing differences)  CSPF was the top plan because its difference is zero by definition  Because one of our key analyses of the data involved comparing investment returns across plans, we also limited the comparable plans to those that shared a common plan year with CSPF (specifically if they have the same plan year-end of December 31)  Of the plans that had the same plan year as CSPF and assets over $300 million, we selected the 20 plans (including CSPF) that had the smallest absolute difference from CSPF in the retiree-to-total liability ratio  Plans with a high ratio of liabilities attributable to retirees will have a relatively large portion of future benefit payments attributable to those that are older and retired  By selecting plans that were similarly mature to CSPF (and had $300 million in assets as of the beginning of 2000), we identified plans that may have had a similar basis for their plan investments, similar cash flow characteristics, or similar potential deviations between time-weighted and dollar-weighted average investment returns over time (see section below entitled “Calculation of Average Investment Return over Multiple Years”)  That is, these plans should have roughly similar cost advantages and similar considerations in their investment objectives such as the balance of cash flows into and out of the fund and the plans’ investment horizons  Similarity in the balance of cash flows is important because it helps to mitigate the influence of plan maturity on the weighted average investment return over multiple years  The year 2000 was used to select the group because the primary purpose of this group is comparison of investment returns for plans that are similarly situated at the beginning of the period being analyzed  Our calculation of investment returns is based on the investment return calculation expressed in the Form 5500 instructions for the Schedule MB  Specifically the instructions of the 2014 Schedule MB state: Enter the estimated rate of return on the current value of plan assets for the 1-year period ending on the valuation date  (The current value is the same as the fair market value—see line 1b(1) instructions ) For this purpose, the rate of return is determined by using the formula 2I/(A + B – I), where I is the dollar amount of the investment return, A is the current value of the assets 1 year ago, and B is the current value of the assets on the current valuation date  Enter rates to the nearest  1 percent  If entering a negative number, enter a minus sign (“ - “) to the left of the number  After preliminary analysis of the variable and consultation with a GAO senior actuary, we determined that Form 5500, Schedule H contains all the information necessary to derive the calculation for years prior to 2008—as far back as 1999 when the Schedule H first came into existence  Additionally, we made adjustments for the timing of cash flows, to the extent indicated by the data  For example, employer and employee contributions that were considered receivable at the end of the prior year and thus included in the Schedule MB calculation were instead included in the year when the plan received the cash for the contribution  Thus, our calculation of annual rate of return is expressed as line items of the 2014 Schedule H to be: 2 * / [[{item1(f)a} – {item 1(b)1(a)} - {item 1(b)2(a)} - {item 1j(a)}] + [{item1(f)b} – {item 1(b)1(b)} - {item 1(b)2(b)} - {item 1j(b)}] – [{item 2d} - {item 2a(3)} – {item 2c}]] Or expressed with expository names as: (2 * (TLINCOME - TOTLCON - OTHERINCOMEW)) / ((TASSTSBY - (ERCONBOY + EECONBOY + OTHER_LIAB_BOY_AMT)) + (TASSTSEY - (ERCONEOY + EECONEOY + OTHER_LIAB_EOY_AMT)) - (TLINCOME - TOTLCON - OTHERINCOMEW)) For purposes of data reliability and validation of our results, we ran permutations of the calculation to see how, if at all, certain items could influence the calculation  In two permutations, we changed the timing of net asset transfers to or from other plans  (This occurs when, for example, there is a plan merger ) A senior actuary determined whether the calculations with/without net asset transfers affected our calculation  If the timing of the net transfer caused the investment return calculation to vary by more than 0 1 percent, we excluded the data for that particular plan in that particular year  We also ran another calculation that did not include “other” income so we could estimate the impact of not adjusting for such information  Historical average investment returns over multiple years can be calculated in at least two different ways  One measure is the “time- weighted” average return, calculated as a geometric average of the annual returns during the period  A time-weighted average measures average investment performance without regard to the order of the annual returns or the impact of different plan circumstances over time  Another measure is the “dollar-weighted” average return–also known as the “internal rate of return” (and also referred to as the “cash flow weighted” return in this report)—which reflects the impact of the plan’s cash flow pattern  The dollar-weighted average return is the rate that, when applied over time to the asset value at the beginning of the period and to each year’s net cash flow into or out of the plan over the period, reproduces the asset value at the end of the period  We calculated dollar-weighted average returns (along with some time- weighted returns for comparison), for both CSPF and for the multiemployer system as a whole, as discussed in the report  We used a market value of plan assets for this purpose  The dollar-weighted average captures the impact of negative cash flow on average investment return  For example, with negative cash flow, investment results in an earlier year can have a bigger impact than investment results in a later year because more money is at stake in the earlier year  Using the same beginning-of-period asset value, and subsequent annual net cash flows into or out of the plan, used in calculating the dollar- weighted average return, we also performed a hypothetical calculation of what CSPF’s end-of-period asset value would have been if the plan had earned 7 5 percent per year instead of its actual return  Conceptually, there are multiple ways to express investment fees, but our analysis used the following two methods for calculating them: Investment fee ratio  Investment fees [line 2i(3) of the 2014 Schedule H] divided by end-of-year net assets [line 1l(b) of the 2014 Schedule H] less receivables [line 1b(1)(b); line 1b(2)(b); and line 1b(3)(b) of the 2014 Schedule H]  Investment fees per participant  Investment fees [line 2i(3) of the 2014 Schedule H] divided by total (end-of-year) participants [line 6f of the 2014 main form]  We define administrative expenses as all other expenses besides investment fees  In part, we used this definition of administrative expenses as it represents the expenses that remain after excluding investment fees  In addition, according to a PBGC analyst, this is the unit of analysis that they also used in their study of administrative expenses  Administrative expense to benefits paid  This is administrative expenses (professional, contract and other) divided by benefits paid  For administrative expenses we derived the value by taking total expenses less investment fees   For benefits paid, we used the 2014 Schedule H, line 2e(1), “Benefit payment and payments to provide benefits directly to participants or beneficiaries, including direct rollovers ” However, if the benefit payment value for such payments is missing or zero, we used the 2014 Schedule H, line 2e(4) “Total Benefit Payments” since the plan may be expressing their benefit payments on another line  Administrative expense per participant  Administrative expenses (professional, contract and other) divided by total (end-of-year) participants   For administrative expenses we derived the value by taking total expenses [line 2i(5) of the 2014 Schedule H] less investment fees [line 2i(3) of the 2014 Schedule H]  PBGC Study on Administrative Expenses PBGC has reported on administrative expenses and included various breakouts of these data in past data book supplements  The calculations of administrative expenses in this report are similar to those used by PBGC  Certain differences may exist because our calculation did not include certain multiemployer plans that reported missing data  Additionally, our population of multiemployer plans included only those plans exclusively associated with defined benefit features  The table below compares our results for plans with 5,000 or more participants, which is a subset of plans analyzed in the PBGC study  Our results used a sample that includes three fewer plans than the PBGC study, but our distributional results were within one-tenth percent for the administrative expense ratio and within $5 of the administrative expenses per participant (see table 4)  Comparing the administrative expenses across reports using other statistics such as the minimum, maximum and standard deviation shows similar results for the PBGC and our analysis (see table 5)  The mean administrative expenses per participant differ by $2 47  This difference is 1 5 percent lower than the PBGC estimate and could be a result of the difference in sample size  We also performed additional analyses as summarized below  We compared CSPF’s annual returns against plans that have the largest assets among multiemployer defined benefit plans (with the same plan year as CSPF) and CSPF’s results against these plans were broadly similar to results for the mature plans (see fig  22)  We compared CSPF’s administrative expenses as a percentage of benefit paid against other large plans  As noted in this report, CSPF has the lowest relative administrative expenses among the comparators in 2014 with administrative expenses at 1 4 percent of benefits (see fig  23)  In addition, CSPF’s administrative expenses as a percentage of benefits were consistently below the median  For our analysis of Wilshire TUCS data, we used two sources of data  Data from 1999 through 2016 was provided by CSPF  CSPF provided reports of their TUCS custom comparison group, master trusts with greater than $3 billion in assets  These data also included the year-end return results for the total fund (also known as the combined fund) as well as returns by subcategory such as a specific named fiduciary or fund  For example, subcategories listed for year-end 2006 included the results for both named fiduciaries (Goldman Sachs and Northern Trust) as well as the passively-managed accounts (then known as the CSSS fund)  The custom comparison groups for the 1999 through 2016 data were determined each year in early-February of the year following the December 31 return results for the prior year  Thus, over time more master trusts were added (or subtracted) depending on the level of assets for the master trusts in that year  For example, the return results for year- end 1999 are determined as of February 10, 2000 and the group of master trusts with more than $3 billion contains 62 observations  The number of trusts in the custom group of master trusts with more than $3 billion generally grew over time with the number peaking with the return results for year-end 2014 (determined as of February 9, 2015), which contains 124 observations  The TUCS data from 1995 through 1998 was provided by Wilshire  The comparison group for these data were not selected each year, but, instead, selected retrospectively  For example, the comparison group of master trusts with more than $3 billion from 1995 through 1998 was selected as of January 9, 2017  There were 99 reported observations in 1995 and 132 observations in 1998  In addition, the 1995 through 1998 TUCS data did not include specific returns for CSPF  We were able to find the annual year-end return in the December (i e  year-end) management report, which for these years was provided by the named fiduciary, Morgan Stanley  Below is a list of selected events that have affected the Central States, Southeast and Southwest Areas Pension Fund (CSPF) as identified through a review of relevant documentation and interviews with stakeholders and agency officials  It is not intended to be an exhaustive list of the events that have impacted CSPF, nor is it intended to include comprehensive descriptions of each event  On September 22, 1982, the Department of Labor (DOL) entered into a court-enforceable consent decree with the Central States Southeast and Southwest Areas Pension Fund (CSPF) to help ensure the plan’s assets were managed for the sole benefit of the plan’s participants and beneficiaries as required by the Employee Retirement Income Security Act of 1974 (ERISA)  The consent decree has been amended several times and currently remains in effect, as amended, under the jurisdiction of the Federal Court for the Northern District of Illinois, Eastern Division  Below is a description of the key parties to and their primary responsibilities under the consent decree  The consent decree defines roles and responsibilities for its parties, including the court, the court-appointed independent special counsel, DOL, the plan and its Board of Trustees, and the independent asset manager, which is called the named fiduciary  The primary role of the court is to oversee and enforce the consent decree  Specifically, the court: appointed an independent special counsel to assist it in administering has approval over the appointment of named fiduciaries and trustees; has approval over the appointment of investment managers of the may, for good cause shown, remove a named fiduciary after 60 days’ notice provided to the named fiduciary and DOL; and may, upon request by the plan, dissolve the consent decree absent good cause shown by DOL why the consent decree should continue in effect  The court-appointed independent special counsel is intended to serve the court by assisting in identifying and resolving issues that arise in connection with the plan’s compliance with the consent decree and Part 4 of Title I of ERISA, and to report on the plan to the court  Specifically, the independent special counsel: has full authority to examine the plan’s activities and oversee and report on the plan’s performance of the undertakings of the consent decree; may, with court approval, employ attorneys, accountants, investigators, and others reasonably necessary and appropriate to aid him in the exercise of his responsibilities; has full access to all documents, books, records, personnel, files, and information of whatever type or description in the possession, custody, or control of the plan; may attend meetings of the plan, including meetings of the board of trustees and any meetings at which plan-related matters are discussed or considered; can petition the court to compel the plan to cooperate with the independent special counsel in the performance of his duties and responsibilities; may consult with DOL, the Internal Revenue Service, and other agencies, as appropriate, but must provide access to DOL upon its request to any documents prepared by the independent special counsel within the exercise of his power; is required to file quarterly reports, as well as any other reports the independent special counsel deems necessary or appropriate, with the court, and provide copies to DOL and the plan; may have other powers, duties, and responsibilities that the court may later determine are appropriate; and cannot be discharged or terminated during the duration of the consent decree except for leave of court, and upon the termination, discharge, death, incapacity, or resignation of an independent special counsel, the court will appoint a successor  Under the consent decree, DOL has an oversight role and may object to certain proposed plan changes  Specifically, DOL: may request and review certain reports provided by the plan and any documents prepared by the independent special counsel in the exercise of his authority; may object to the appointment of proposed trustees, named fiduciaries, investment managers of the passively-managed accounts, and asset custodians; receives notice of proposed changes to the plan’s investment policy statements from the plan; and may object to the dissolution of the consent decree  The plan must operate in full compliance with the consent decree, with ERISA, and with any conditions contained in determination letters it receives from the Internal Revenue Service  Specifically, CSPF, its board of trustees, and its internal audit staff must meet certain requirements  is required to use an independent asset manager known as the named fiduciary; must rebid the named fiduciary role at least once within every 6 years, with the option to extend the appointment for 1 calendar year; may remove a named fiduciary without cause shown on 6 months’ written notice to the named fiduciary and DOL; must cooperate with the independent special counsel in the performance of his duties and responsibilities and with DOL in its continuing investigation and enforcement responsibilities under ERISA; is required to recommend to the court three replacement candidates, agreeable to DOL, to replace an outgoing independent special counsel; and is required to maintain a qualified internal audit staff to monitor its affairs  is required to appoint, subject to court approval, the investment managers of the passively-managed accounts; is prohibited from authorizing any future acquisitions, investments, or dispositions of plan assets on a direct or indirect basis unless specifically allowed by the consent decree; and is required to comply with ERISA fiduciary duties, such as monitoring the performance of the assets of the plan, under Part 4 of Title I of ERISA  is required to review benefit administration, administrative expenditures, and the allocation of plan receipts to investments and administration; and is required to prepare monthly reports setting forth any findings and recommendations, in cooperation with the executive director of the plan, and make copies available to the independent special counsel and, upon request, to DOL and the court  The independent asset managers, known as named fiduciaries, are appointed by the plan’s trustees, subject to court approval, and have exclusive responsibility and authority to manage and control all assets of the plan allocated to them  Specifically, the named fiduciaries: may allocate plan assets among different types of investments and have exclusive authority to appoint, replace, and remove those have responsibility and authority to monitor the performance of their are required to develop, in consultation with the Board of Trustees, and implement investment policy statements for the assets they manage, giving appropriate regards to CSPF’s actuarial requirements  In addition to the individual named above David Lehrer (Assistant Director), Charles J  Ford, (Analyst-in-Charge), Laurel Beedon, Jessica Moscovitch, Layla Moughari, Joseph Silvestri, Anjali Tekchandani, Margaret J  Weber, Adam Wendel, and Miranda J  Wickham made key contributions to this report  Also contributing to this report were Susan Aschoff, Deborah K  Bland, Helen Desaulniers, Laura Hoffrey, Jennifer Gregory, Sheila McCoy, Mimi Nguyen, Jessica Orr, Monica P  Savoy, and Seyda Wentworth  Central States Pension Fund: Department of Labor Activities under the Consent Decree and Federal Law  GAO-18-105  Washington, D C : June 4, 2018  High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others  GAO-17-317  Washington, D C : February 15, 2017  Pension Plan Valuation: Views on Using Multiple Measures to Offer a More Complete Financial Picture  GAO-14-264  Washington, D C : September 30, 2014  Private Pensions: Clarity of Required Reports and Disclosures Could Be Improved  GAO-14-92  Washington, D C : November 21, 2013  Private Pensions: Timely Action Needed to Address Impending Multiemployer Plan Insolvencies  GAO-13-240  Washington, D C : March 28, 2013  Private Pensions: Multiemployer Plans and PBGC Face Urgent Challenges  GAO-13-428T  Washington, D C : March 5, 2013  Pension Benefit Guaranty Corporation: Redesigned Premium Structure Could Better Align Rates with Risk from Plan Sponsors  GAO-13-58  Washington, D C : November 7, 2012  Private Pensions: Changes Needed to Better Protect Multiemployer Pension Benefits  GAO-11-79  Washington, D C : October 18, 2010  Private Pensions: Long-standing Challenges Remain for Multiemployer Pension Plans  GAO-10-708T  Washington, D C : May 27, 2010  The Department of Labor’s Oversight of the Management of the Teamsters’ Central States Pension and Health and Welfare Funds  GAO/HRD-85-73  Washington, D C : July 18, 1985  Investigation to Reform Teamsters’ Central States Pension Fund Found Inadequate  HRD-82-13  Washington, D C : April 28, 1982 
Report 2:  if the officer is survived by only a spouse, 100% of the death benefits are payable to the spouse; 2  if the officer is survived by a spouse and children, 50% of the death benefits are payable to the spouse and the remaining 50% is distributed equally among the officer's children; 3  if the officer is survived by only children, the death benefits are equally distributed among the officer's children; 4  if the officer has no surviving spouse or children, the death benefits are paid to the individual or individuals designated by the officer in the most recently executed designation of beneficiary on file at the time of the officer's death; or if the officer does not have a designation of beneficiary on file, the benefits are paid to the individual or individuals designated by the officer in the most recently executed life insurance policy on file at the time of the officer's death; 5  if the officer has no surviving spouse or eligible children, and the officer does not have a life insurance policy, the death benefits are equally distributed between the officer's surviving parents; or 6  if the officer has no surviving spouse, eligible children, or parents, and the officer did not have a designation of beneficiary or a life insurance policy on file at the time of his or her death, the death benefits are payable to surviving adult, nondependent, children of the officer  PSOB disability benefits are paid only in cases of permanent and total disability  There are no benefits payable for partial or short-term disabilities  A disability is considered permanent for the purposes of PSOB eligibility if, given the current state of medicine in the United States, there is a degree of medical certainty that the condition will remain constant or deteriorate over the person's lifetime or that the public safety officer has reached maximum medical improvement  A public safety officer is considered to be totally disabled for the purposes of PSOB eligibility if given the current state of medicine in the United States, there is a degree of medical certainty that the officer is unable to perform any gainful work  PSOB regulation defines gainful work as "full- or part-time activity that is compensated or commonly compensated " Applications for PSOB death and disability benefits are filed with the PSOB office, which determines benefit eligibility and commences benefit payment  Unless extended for good cause, application deadlines must be met  Complete benefit applications must be filed no later than for death benefits: three years after the death; one year after the determination of the officer's employing agency to award or deny death benefits payable by that agency; or one year after certification by the officer's employing agency that the agency is not authorized to pay any death benefits; and for disability benefits: three years after the date of the injury; one year after the determination of the officer's employing agency to award or deny workers' compensation or disability benefits payable by that agency; or one year after certification by the officer's employing agency that the agency is not authorized to pay any workers' compensation or disability benefits  A lump-sum interim payment of up to $3,000 may be made if a PSOB death benefit will "probably be paid " The interim payment amount reduces the final PSOB payment amount  If the ultimate decision is to deny death benefits, the interim payment must be returned to the federal government, unless this repayment is waived because it would create a hardship for the beneficiary  Section 611 of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act; P L  107-56 ) provides for expedited payment of PSOB death and disability benefits if the officer's injury occurred "in connection with prevention, investigation, rescue, or recovery efforts related to a terrorist attack " In such cases, PSOB benefits must be paid within 30 days of certification from the officer's employing agency that the officer's death or disability was related to terrorism  The Public Safety Officers' Education Assistance (PSOEA) program provides financial assistance with costs associated with higher education to the spouse or children of a public safety officer who is eligible for PSOB death or disability benefits  The spouse or child of a public safety officer who is eligible for PSOB death or disability benefits may be eligible for PSOEA benefits  To be eligible for PSOEA benefits, a spouse must have been married to an eligible public safety officer at the time of the officer's death or injury  A child is eligible for PSOEA benefits until the age of 27  This age limit can be extended by the Attorney General in extraordinary circumstances, or, pursuant to Section 3 of the Public Safety Officers' Benefits Improvement Act of 2017 ( P L  115-36 ), if there is a delay of more than one year in approving PSOB or PSOEA benefits  In addition, to be eligible for PSOEA benefits, the spouse or child must be enrolled at an eligible educational institution  For the purposes of PSOEA eligibility, an eligible education institution is one that meets the definition of an "institution of higher education" as provided by Section 102 of the Higher Education Act of 1965 and that is eligible for federal student aid  PSOEA benefits are payable to the claimant and may be used only to defray costs associated with higher education attendance, including tuition, room, board, book and supplies, and education-related fees  The monthly PSOEA benefit amount is equal to the monthly benefit amount payable under the GI Bill Survivors' and Dependents' Educational Assistance (DEA) program, which is administered by the Department of Veterans Affairs (VA) for spouses and dependents of veterans with disabilities or who died as a result of service-connected conditions  The PSOEA benefit amounts are adjusted annually to reflect changes in the cost of living in accordance with changes to the GI Bill DEA benefit amounts  For FY2019, the PSOEA monthly benefit for a student attending an educational institution full-time is $1,224  The PSOEA benefit rates are prorated for less than full-time attendance  The maximum duration of PSOEA benefits for any person is 45 months of full-time education or a proportionate duration of part-time education  A person is ineligible for PSOEA if he or she is in default on a federal student loan or is ineligible for federal benefits due to a drug trafficking or drug possession conviction  In addition, the Attorney General may discontinue PSOEA benefits for a student that fails to make satisfactory progress in his or her course of study as defined by Section 484(c) of the Higher Education Act of 1965  A claimant who is dissatisfied with a PSOB disability benefit denial may request a reconsideration  There is no reconsideration offered for denials of PSOB death or PSOEA benefits  A claimant who is dissatisfied with a PSOB or PSOEA benefit denial may request a de novo hearing before a hearing officer assigned by the director of the DOJ PSOB Office  The determination of a hearing officer may be appealed to the PSOB Office director  The director's determination is considered the final agency determination and is not subject to any further agency administrative review or appeal  However, provided all administrative appeals remedies have been exhausted, the PSOB Office director's determination may be appealed to the United States Court of Appeals for the Federal Circuit  The PSOB statute authorizes the BJA to prescribe the maximum fee that an attorney or other representative may charge a claimant for services rendered in connection with a claim, with attorney fees generally limited to between 3% and 6% of the total benefit paid, depending on the level in the administrative appeals process the claim is approved  Program regulation prohibits stipulated-fee and contingency-fee arrangements for PSOB representation  Congress provides funding for PSOB and PSOE benefits and associated administrative expenses in the annual Departments of Commerce and Justice, Science, and Related Agencies Appropriations Act  Funding for PSOB death benefits and associated administrative expenses is considered mandatory spending and Congress appropriates "such sums as may be necessary" for the payment of these benefits  Funding for PSOB disability and PSOEA benefits is considered discretionary and is subject to specific congressional appropriations  Annual appropriations language grants the Attorney General the authority to transfer from any available appropriations to the DOJ the funds necessary to respond to emergent circumstances that require additional funding for PSOB disability benefits and PSOEA benefits  

ground_truth: Multiemployer plans are collectively bargained pension agreements often between labor unions and two or more employers. CSPF is one of the nation's largest multiemployer defined benefit pension plans, covering about 385,000 participants. Since 1982, the plan has operated under a court-enforceable consent decree which, among other things, requires that the plan's assets be managed by independent parties. Within 7 years, CSPF estimates that the plan's financial condition will require severe benefit cuts. GAO was asked to review the events and factors that led to the plan's critical financial status and how its investment outcomes compare to similar plans. GAO describes (1) what is known about the factors that contributed to CSPF's critical financial condition; (2) what has been CSPF's investment policy, and the process for setting and executing it, since the consent decree was established; and (3) how CSPF's investments have performed over time, particularly compared to similar pension plans. GAO reviewed relevant federal laws and regulations; interviewed CSPF representatives, International Brotherhood of Teamsters officials and members, federal officials, and knowledgeable industry stakeholders; reviewed CSPF documentation including investment policy statements and board of trustee meeting minutes; and analyzed investment returns and fees from required, annual pension plan filings and from consultant benchmarking reports. The Central States, Southeast and Southwest Areas Pension Fund (CSPF) was established in 1955 to provide pension benefits to trucking industry workers, and is one of the largest multiemployer plans. According to its regulatory filings, CSPF had less than half the estimated funds needed to cover plan liabilities in 1982 at the time it entered into a court-enforceable consent decree that provides for oversight of certain plan activities. Since then, CSPF has made some progress toward achieving its targeted level of funding; however, CSPF has never been more than 75 percent funded and its funding level has weakened since 2002, as shown in the figure below. Stakeholders GAO interviewed identified numerous factors that contributed to CSPF's financial condition. For example, stakeholders stated that changes within the trucking industry as well as a decline in union membership contributed to CSPF's inability to maintain a healthy contribution base. CSPF's active participants made up about 69 percent of all participants in 1982, but accounted for only 16 percent in 2016. The most dramatic change in active participants occurred in 2007 when the United Parcel Service, Inc. (UPS) withdrew from the plan. At that time, UPS accounted for about 30 percent of the plan's active participants (i.e. workers). In addition, the market declines of 2001 to 2002 and 2008 had a significant negative impact on the plan's long-term investment performance. Stakeholders noted that while each individual factor contributed to CSPF's critical financial condition, the interrelated nature of the factors also had a cumulative effect on the plan's financial condition. Both CSPF's investment policy and the process for setting and executing it have changed several times since the consent decree was established in 1982. The original consent decree gave an independent asset manager—called a named fiduciary—exclusive authority to set and change the plan's investment policies and manage plan assets, and prohibited CSPF trustees from managing assets or making investment decisions. Initially, the named fiduciaries sold the troubled real estate assets acquired during the pre-consent decree era. Subsequent changes include the following: In 1993, the named fiduciaries started to increase investment in equities, and their policies continued to direct that asset allocations be weighted toward equities until early 2017. Between 2003 and 2010, the court approved three plan decisions to move a total of 50 percent of CSPF's assets into passively-managed accounts (passive management typically seeks to match the performance of a specific market index and reduce investment fees). An early-2017 investment policy change precipitated by CSPF's deteriorating financial condition will continue to move plan assets into fixed income investments ahead of projected insolvency, or the date when CSPF is expected to have insufficient assets to pay promised benefits when due. As a result, assets will be gradually transitioned from “return-seeking assets”—such as equities and emerging markets debt—to high-quality investment grade debt and U.S. Treasury securities with intermediate and short-term maturities. The plan is projected to become insolvent on January 1, 2025. CSPF officials and named fiduciary representatives said these changes are intended to reduce the plan's exposure to market risk and volatility, and provide participants greater certainty prior to projected insolvency. GAO found that CSPF's investment returns and expenses were generally in line with similarly sized institutional investors and with demographically similar multiemployer pension plans. For example, GAO's analysis of returns using the peer group measure used by CSPF known as the Wilshire Associates' Trust Universe Comparison Service (TUCS), showed that CSPF's annual investment returns since 1995 were above the median about as many times as they were below. Similarly, comparing CSPF's returns to a peer group of similar multiemployer defined benefit plans using federally required annual reports found that CSPF's annual investment returns were in line with those of its peers. Specifically, CSPF's annual returns were above the median nine times and below it six times—and CSPF's overall (dollar-weighted) average annual return from 2000 through 2014 was close to that of the peer median average return of 4.8 percent. In addition, GAO found that CSPF's investment fees and other administrative expenses have also been in line with other large multiemployer plans. For example: CSPF's investment fees as a percentage of assets were about 9 percent lower than the median of large defined benefit multiemployer plans over the 2000 through 2014 period—though much of that difference is accounted for by a relative reduction in investment fees since 2007. CSPF's investment fees as a percentage of assets were, on average, about 34 basis points (or 0.34 percent). CSPF's administrative expenses related to the day-to-day operations of the plan have also been in line with other large multiemployer plans. CSPF's administrative expenses per participant were below the median for large defined benefit multiemployer plans for 12 of the 15 years over the 2000 through 2014 period. As of 2014, CSPF's administrative expense was $98 per participant, which is about 16 percent less than the median for large defined benefit multiemployer plans. GAO is not making recommendations in this report.