Page 18.0 

Automotive Industries Pension Plan 

Checklist Item #18 

Does the application include information on past and current measures taken to avoid 

insolvency? 

See section 5.01. 

Yes. The documentation is attached as Document No. 18.1. 
Page 18.1.1 

Document No. 18.1 

The Trustees have taken numerous measures to avoid insolvency over the past 10 plan years. 

These measures have included elimination of adjustable benefits, accrual rate reductions, adoption of a 

Rehabilitation Plan and consideration of merger, PBGC approved managed mass withdrawal and plan 

partition. 

The Trustees began these measures over 10 years ago in response to lower than expected 

investment returns and a declining contribution base, when it reduced the accrual rate from 5% of 

contributions to 3% effective July 1, 2003. The Trustees further reduced the accrual rate from 0.50% of 

contributions made for the first $250 of monthly contributions, 1% for the second $250 of monthly 

contributions and 2% for monthly contributions in excess of $500, effective January 1, 2005. 

In 2008, the Plan was certified to be in “critical” status under the Pension Protection Act of 

2006 and the Trustees adopted the 2008 Rehabilitation Plan. The Rehabilitation Plan reduced the 

benefit accrual rate to 1% of total contributions made on a participant’s behalf, effective for 

contributions after July 1, 2008. The 2008 Rehabilitation Plan eliminated all early retirement subsidies, 

(including the “Rule of 85” benefit, whereby a participant was eligible, with certain limitations, for an 

unreduced early retirement benefit when the participant’s age plus their years of service totaled 85) and 

all subsidies on the Automatic Joint and Survivor Benefit. The Rehabilitation Plan also eliminated all 

future disability awards, the 36 month guarantee of pre-retirement death benefit awards and all optional 

forms of payments on pension awards. Single participants can only receive the single life annuity with 

no death benefits. The 50% or 75% joint and survivor benefit available for married participants is 

unsubsidized. The 2008 Rehabilitation Plan also instituted supplemental contribution increases 

through a Default Schedule, whereby employers were obligated to pay an additional amount that does 

not count towards benefit accruals. These supplemental contribution increases were scheduled to begin 

in 2013. 

In 2012, the Board of Trustees in consultation with its actuary, reviewed the Rehabilitation Plan 

and determined the following. Under the Worker, Retiree and Employer Recovery Act of 2008, the 

Trustees elected to extend the 10-year Rehabilitation period by 3 years to December 31, 2023. Even 

with the extension, the Trustees determined that the Plan could not emerge from Critical Status by the 

end of the rehabilitation period. Reflecting the Plan’s actual experience through January 1, 2011, the 

supplemental contributions of the 2008 Default Schedule would have needed to increase from 12.5% to 

35.8% per year for 7 years in order to emerge by the end of 2023. The average contribution rate would 

have needed to grow from $394 to $3,356 per month by the final year. 
Page 18.1.2 

The Trustees concluded that such increases in the supplemental contribution rate were 

unreasonable and would cause considerable risk to the Plan and its participants. Based on the decline in 

the automotive industry, the rapid decline of contributing employers and active participants in the Plan 

and information regarding a substantial risk of withdrawals of the remaining larger contributing 

employers, the Board of Trustees concluded that the risk to the Plan’s existence and the ability to keep 

contributing employers and maintain or improve the Plan’s funded status would be jeopardized by any 

attempt to emerge from Critical Status by the end of the rehabilitation period. Thus, the changes to the 

Rehabilitation Plan adopted by the Trustees in 2012 were designed to forestall insolvency. 

Effective July 9, 2012, the Trustees adopted an updated Rehabilitation Plan which further 

eliminated the early retirement benefit for inactive vested participants and adjusted the rate of the 

supplemental contribution increase. The 2012 update to the Rehabilitation Plan imposed a 5% 

cumulative supplemental contribution on employers. Employers began paying the 5% supplemental 

contributions in 2013 and will continue paying the supplemental contributions through 2019. In 2019, 

employers will pay 40.7% on every dollar that they are otherwise required to contribute to the Plan 

because the 5% supplemental contribution is cumulative (i.e., employers paid an additional 5% in 2013, 

10.3% in 2014, 15.8% in 2015, etc.). 

The Trustees also pursued other strategies to avoid insolvency. The Trustees considered various 

measures that involved the PBGC, such as a PBGC assisted merger, PBGC approved mass withdrawal 

and a plan partition. The Trustees also pursued merger opportunities outside the PBGC. Unfortunately, 

the PBGC assistance would have been insufficient to solve the problem. A plan partition (based on preMEPRA law) of liabilities related to benefits earned by participants from bankrupt employers was not 

viable due to the relatively small amount of plan liability eligible for assistance. The Trustees were 

unable to locate another pension plan willing or able to merge with the Plan in its current state.