Central States Pension Fund: Department of Labor Activities under the Consent Decree and Federal Law
Released: 2018-06-04T00:00:00

Letter

Background

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.

Multiemployer Plan Administration, Funding, and Benefits

Administration

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.

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.

Benefits

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.

The Central States, Southeast and Southwest Areas Pension Fund (CSPF)

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. I for a timeline of key events affecting CSPF.)

The Consent Decree

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. II for additional detail on the key provisions of the consent decree.)

Legal Framework

Employee Retirement Income Security Act of 1974

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. I 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.

Key Amendments to ERISA Affecting Multiemployer Plans

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.

CSPF’s Critical Financial Condition Is a Result of Factors That Reflect Challenges Experienced by the Multiemployer System

CSPF Has Been Underfunded Since the Consent Decree Was Established

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.

Stakeholders Described Multiple Factors That Contributed to CSPF’s Critical Financial Condition, Many of Which Have Been Experienced by Other Multiemployer Plans

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.

Key Industry Specific Workforce Trends

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.

Funding Challenges and Investment Practices

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.

Investment Performance and Market Downturns

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.

Effect of UPS Withdrawal

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.

DOL Has Provided Oversight in Its Role As Described in the Consent Decree

Roles and Responsibilities Identified in the Consent Decree

The consent decree describes roles and responsibilities for several parties, including CSPF, its trustees, and DOL. Generally, it reiterates the requirement that CSPF must comply with ERISA, and gives DOL the authority to provide input on certain actions proposed by the plan. Additionally, the consent decree requires CSPF to employ a named fiduciary to administer and manage the plan’s investment assets, set investment policy, and select and supervise investment managers to create separation of plan trustees and staff from the management of plan investments. The plan must seek court approval for certain actions, such as the appointment of new trustees and named fiduciaries, and DOL can raise objections to these proposed actions. The named fiduciary must also seek court approval for proposed changes to the investment policy. (Appendix II provides a more comprehensive description of roles and other key provisions of the consent decree and its amendments.) The consent decree also provides for a court-appointed independent special counsel to assist the court in overseeing the plan, attend meetings of the board of trustees, and submit quarterly reports on plan activities to the court (see table 1).

Although certain stakeholders have stated that the consent decree has achieved its purpose, DOL and CSPF agree that it still provides valuable protections, and the consent decree remains in place. The intent of the consent decree was to address alleged breaches of fiduciary duties under ERISA, including plan officials’ roles in the mismanagement of assets that were identified during DOL’s investigation of the plan in the 1970s. The former Assistant Secretary for the Employee Benefits Security Administration (EBSA) stated that the consent decree was primarily focused on preventing corrupt conduct and the influence of organized crime found during investigations prior to the consent decree’s establishment. Stakeholders agreed the consent decree accomplished its objectives by requiring the plan to seek court approval for certain activities. In 2004, the presiding judge noted in a memorandum opinion and order that the “professional management guidelines” that arose from the consent decree had worked well. In 2002, discussions arose between CSPF and DOL as to whether the consent decree should be dissolved. In 2011, the independent special counsel wrote in a letter to the court that he believed the plan was well-run and the role of the independent special counsel was no longer necessary. However, DOL officials stated that the provisions of the consent decree have created a strong incentive for ERISA compliance and have had a positive impact on the administration of the plan and the selection of trustees. Similarly, CSPF officials stated they had not requested the consent decree be dissolved because its requirements have provided valuable protection from stakeholder influence.

DOL Conducted a Number of Oversight Activities under the Consent Decree

In accordance with the requirements of the consent decree, DOL may provide input on and oversight to certain plan activities. For example, DOL may comment on or object to proposedboard of trustee candidates and proposed named fiduciaries prior to court approval. CSPF must provide notice to the court and DOL within specific time frames when seeking court approval for such actions. The consent decree requires CSPF to submit trustee and named fiduciary candidates to the court and DOL 60 days before filing their request for court approval (see fig. 8). In addition, the consent decree states that CSPF must notify DOL of new trustee candidates, selected by union or employer processes, 60 days prior to the proposed effective date of the candidate’s term and DOL may object to, or comment on, the approval of trustee candidates within 30 days.

Although the consent decree does not require DOL to take any specific actions in determining whether it will comment on or object to a trustee candidate, DOL officials reported that with the assistance of other agencies they have taken the following steps to review trustee candidates:

Requesting trustee candidate information. DOL requests that CSPF provide information on prospective trustee candidates;

Providing questionnaires to trustee candidates via CSPF. Responses to questionnaires are reviewed by DOL’s Offices of Labor- Management Standards and Inspector General, the Department of Justice, the Federal Bureau of Investigation, and the Office of the Chief Investigator at the Teamster’s Independent Review Board (IRB);

Compiling additional information. DOL searches internal and external databases for information regarding the trustee candidates;

Assessing the information. DOL reviews any findings identified by the attorney assigned to CSPF in DOL’s Office of the Solicitor, officials in DOL’s Plan Benefits Security Division, and EBSA management staff. A recommendation regarding whether to file an objection is discussed and, if filing an objection is being considered, it is first discussed with the plan; and

Filing objections. If any identified issues cannot be resolved, DOL files an objection with the court.

Documents submitted to the court by DOL also indicated the agency has sought input on trustee candidates from PBGC, IRS, and the National Labor Relations Board. Several trustees we interviewed confirmed that DOL’s process to vet them included background checks. Our review of correspondence and other documentation found DOL routinely took such steps to vet trustee candidates. CSPF and DOL provided documents associated with the appointment and approval process of the 21 trustees appointed to the board since 1982 and one additional trustee candidate who was not presented to the court for approval because DOL identified issues during the vetting process. Vetting trustees took from approximately 1 to 5 months for the cases we reviewed. Our review of documentation also found that DOL provided input and collaborated with CSPF in two cases where approved trustees were asked to resign post- approval.

The length of time for the process to vet trustee candidates (in advance of submitting them to the court) varied, but, in the cases we reviewed, took as long as 5 months. Correspondence showed various factors contributed to in the duration of DOL’s vetting process prior to submitting candidates to the court for approval, including DOL officials’ workload and vacation schedules, scheduling, and additional time spent clarifying any issues identified during the vetting process.

In 2009, the vetting processes used by CSPF and DOL identified concerns with a trustee candidate before the candidate was presented to the court. During the 4-month vetting process, the candidate was found to be involved in two ongoing court cases in his role as a fiduciary for two other pension plans. Although the nominating employer association did not consider his involvement in the suit to be a problem, they eventually withdrew the nomination and proposed another candidate.

In 2012, DOL’s review of a candidate to fill a vacancy left by a trustee who died during his term in office was completed in approximately 1 month.

In 2015, DOL’s vetting process for a trustee candidate identified and resolved a concern before the candidate was presented to the court. DOL reported that they made inquiries to agencies and the Teamsters’ Independent Review Board (IRB) about the candidate during the vetting process, and the IRB did not report any issues with the trustee candidate at the time of DOL’s inquiry. More than 7 months after the candidate was approved, DOL received a report from the IRB that alleged lapses in financial controls and expense payment practices and procedures at a Teamsters’ local union office when the then-trustee had served as president. The trustee resigned from CSPF’s board 7 weeks later, but continued to serve as a trustee for an additional 5 months until a replacement was vetted by DOL and presented to the court for approval.

In 2007 and 2009, CSPF kept DOL apprised of trustees who resigned and were replaced because employers were leaving the plan.

The consent decree does not discuss court or DOL involvement in resolving issues with trustees already serving on the board, but in 1996, DOL assisted the CSPF board of trustees when they learned that one of their trustees, who had been on the board of CSPF for about 11 years, was accused of fiduciary misconduct in carrying out his duties for another pension plan. To assist the nominating board and the plan’s board of trustees in determining the proper course of action, CSPF consulted with DOL and the court before filing a motion with the court to appoint a special counsel to investigate, and to authorize expenditures for the investigations. Following the special counsel’s report, the nominating board recommended that trustee be removed, and the trustee chose to resign.

Documents we reviewed also indicated DOL provided input to CSPF and the court on proposed amendments to the consent decree. For example, DOL assisted in writing a proposed amendment that would allow for the addition of a second named fiduciary and for named fiduciaries to act as investment managers for the plan. In addition, in 2007, a named fiduciary requested that CSPF assume responsibility for determining the plan’s asset allocation and indemnify it for any losses it might incur in fulfilling its role. In response to the request, CSPF considered several approaches to insulating the named fiduciary from fiduciary risk, and whether they would be inconsistent with the consent decree; however, CSPF decided against requesting the consent decree be dissolved. CSPF officials consulted with DOL regarding the approaches they considered, including one that would allow for flexibility in the allocation of investment assets within prescribed bands. CSPF waited to file its motion to amend the consent decree until DOL had an opportunity to evaluate the proposals. CSPF decided not to proceed with the proposed amendments, and instead worked with the named fiduciary to make changes to the investment policy to reduce risk for the named fiduciary. In our review of documents provided by CSPF, we also found that DOL regularly reviewed the quarterly reports from the independent special counsel, which included topics of discussion at the meetings of the board of trustees, a quarterly financial report, and other recent events of significance to the plan.

Our review of communication between CSPF and DOL showed the plan also provided updates and allowed for DOL’s input on other actions. For example, CSPF responded to DOL inquiries about changes in the number of participants and the plan’s funded status in 2011 and 2014, respectively. In 2009, CSPF also provided details about a possible arrangement to allow a contributing employer that was at risk of bankruptcy to defer its contribution payments instead of suspending its participation in the plan. CSPF received input from DOL on the employer’s request to use real estate as collateral in place of cash contributions to the plan.

DOL Conducted Investigations of CSPF in Accordance with Its Role under ERISA

DOL Has Primary Responsibility for Enforcing ERISA’s Fiduciary Provisions

Separate from its role under the consent decree, DOL has a primary oversight role over plans under ERISA, which it carries out through investigations and other activities. DOL is responsible for enforcing the reporting, disclosure, and fiduciary responsibility provisions of ERISA. Additionally, ERISA grants DOL investigative authority. Title I of ERISA establishes responsibilities for fiduciaries, such as persons who are responsible for the administration and management of employee benefit plans, to ensure that they act solely in the interest of plan participants and beneficiaries, and gives DOL authority to examine and investigate plans to ensure they comply with the provisions.

ERISA sets forth a “prudent man” standard of care that requires fiduciary duties to be executed “…with the care, skill, prudence, and diligence…that a prudent man acting in a like capacity and familiar with such matters would use…”. According to a DOL compliance guide, prudence focuses on the process for making fiduciary decisions, and the guide states that a fiduciary lacking needed expertise is encouraged to hire others with professional knowledge to carry out fiduciary function, including investing fund assets. The guide further notes that, if a plan appoints an investment manager that is a bank, insurance company, or registered investment advisor, the plan is responsible for selecting and monitoring the manager, but is not liable for the individual investments of that manager. Further, in testimony, the former Assistant Secretary for EBSA stated that plan fiduciaries are not liable for plan losses merely because an investment lost money, but rather would be in instances where they acted imprudently in selecting and monitoring investments. Beyond the requirements of ERISA, the consent decree requires that CSPF hire a named fiduciary with exclusive responsibility and authority to manage and control the assets allocated to them. The consent decree also requires the independent special counsel to provide quarterly reports to the court and DOL. The quarterly reports include topics of discussion at the meetings of the board of trustees, a quarterly financial report, and other recent events of significance to the plan.

Although stakeholders identified major factors contributing to the plan’s critical financial condition those factors are not the focus of DOL’s role under ERISA. DOL has provided assistance to the plan in identifying and assessing solutions to its financial condition. For example, in 2010, CSPF’s executive director worked directly with the assistant secretary of Labor as the plan prepared a partition application for PBGC consideration. According to CSPF officials, the plan chose not to submit the application because it did not believe the application would be approved. In 2015, CSPF had discussion with the assistant secretary about MPRA before CSPF ultimately submitted its application to Treasury to reduce pension benefits under MPRA.

CSPF-provided documents show it also collaborated with DOL in developing strategies to improve the broader multiemployer plan system. For example, DOL contacted CSPF’s executive director to participate in a meeting as a “thought leader” on PBGC investment policy. The plan also worked with the assistant secretary and DOL and other government officials on legislative proposals, including modifications to statutes concerning partitioning and how partitions are funded through PBGC. In 2010, the assistant secretary testified regarding changes to the partition process proposed by CSPF and others, stating DOL would continue to work with CSPF on the proposal.

IRS and PBGC also have roles under ERISA related to key factors that stakeholders identified as contributing to CSPF’s critical financial condition. IRS is responsible for enforcing certain ERISA requirements, including minimum participation, vesting and benefit accrual which are generally requirements to qualify for favorable tax treatment and minimum funding standards. Plans certify their PPA funding (or zone) status to IRS annually. PBGC, in addition to collecting premiums and providing financial assistance to insolvent multiemployer plans to pay participants a statutorily guaranteed benefit for the rest of their retirement lifetimes, provides technical assistance to multiemployer plan professionals, monitors plans, and administers certain tools to help preserve plans, such as assisting with plan mergers, reviewing methods for alternative withdrawal liabilities, and providing possible relief through plan partitions.

Two Completed DOL Investigations Resulted in No Action Against CSPF

DOL has completed at least two investigations of the plan since the consent decree was established; neither of which resulted in adverse findings or action against CSPF. DOL carries out its ERISA enforcement through a wide range of activities, including civil and criminal investigations and the agency’s enforcement priorities are set annually at the national level. DOL officials stated that to meet those priorities, the national and regional offices of DOL develop enforcement projects to focus enforcement activities on specific plan activities. Investigations based on enforcement projects or triggered by participant complaints are conducted by regional offices—DOL officials also stated that the Chicago Regional Office is primarily responsible for oversight of CSPF at the regional level. National and regional projects may be broadly applicable or may focus on specific types of plans. Since 2012, there have been seven national projects and five regional projects (two of the regional projects are currently underway). Currently, there is a Chicago Regional Office project focused on multiemployer plans.

DOL officials noted that field offices generally exercise broad discretion in determining when investigations will be opened and what entities or people will be investigated. During investigations, the field offices gather information and evaluate compliance with ERISA’s civil and criminal provisions. Potential issues for investigation are identified through participant complaints, targeting based on computer-generated results of Form 5500 review and analysis, media, and referrals from federal, state, and local government, advocacy groups and service providers. For the period between 2007 and 2016, DOL opened an average of nearly 2,600 civil and criminal pension cases annually; about 5 percent of the cases were investigations of multiemployer plans. ERISA’s fiduciary responsibility provisions are intended to ensure that plan fiduciaries act solely in the interest of plan participants. Accordingly, if investigators review the selection of investments, they generally focus on the fiduciaries’ duty of prudence in the selection and monitoring of investments, rather than the ultimate performance of the asset.

Investigation 1 from DOL’s Case Management System: Opened June 1996, Closed November 1998

The investigation was opened based on a referral from DOL’s Office of the Solicitor, the entity that coordinates DOL oversight of CSPF under the consent decree.

The investigation centered on alleged breaches of fiduciary responsibility by the plan trustees in private litigation. The parties settled for a withdrawal liability of one-fifth of the alleged amount owed and did not pursue a malpractice claim against attorneys who represented CSPF in the litigation.

DOL’s Chicago Regional Office concluded that CSPF trustees were not in violation of ERISA. DOL’s Office of Enforcement concurred.

The investigation was closed without action.

Investigation 2 from DOL’s Case Management System: Opened June 2001, Closed September 2004

The investigation was opened based on a complaint from a former employee of the named fiduciary who alleged he was fired when he brought possible misconduct to the attention of the named fiduciary.

DOL’s investigation was centered on alleged securities violations by the named fiduciary.

DOL’s Chicago Regional Office concluded that no violations occurred.

Because of incomplete documentation from DOL and because agency officials could not provide further information, we were unable to determine why the investigation was closed.

CSPF provided documents that indicated it had also been subject to earlier DOL investigations. For example, CSPF provided a June 1989 letter from DOL indicating the agency had investigated whether CSPF met its fiduciary duties through adequate procedures for monitoring legal services provided to the plan. In the letter, the DOL investigator noted that CSPF had written procedures for monitoring services and addressing disputes and that the plan provided reports showing activities surrounding the monitoring of legal fees. DOL concluded, based on available information, that CSPF had implemented monitoring procedures and DOL would take no further action. DOL did not provide further information about the letter or investigation.

Agency Comments and Our Evaluation

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 me at (202) 512-7215 or jeszeckc@gao.gov. 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 III.

Appendix I: Selected Events Affecting the Central States, Southeast and Southwest Areas Pension Fund

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.

Appendix II: Key Provisions of the Central States, Southeast and Southwest Areas Pension Fund’s Consent Decree

Brief History and Current Status of Consent Decree

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.

Key Parties and Their Primary Roles under 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.

Court

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.

Independent Special Counsel

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.

Department of Labor

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.

CSPF (including Board of Trustees and Internal Audit Staff)

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 one 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.

Named Fiduciaries

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.

Appendix III: GAO Contacts and Staff Acknowledgments

GAO Contact

Charles A. Jeszeck, (202) 512-7215 or jeszeckc@gao.gov.

Staff Acknowledgments

In addition to the individual named above David Lehrer (Assistant Director), Margaret J. Weber, (Analyst-in-Charge), Laurel Beedon, Charles J. Ford, Jessica Moscovitch, Layla Moughari, Joseph Silvestri, Anjali Tekchandani, Frank Todisco, and Adam Wendel made key contributions to this report. Also contributing to this report were Susan Aschoff, Deborah K. Bland, David M. Chrisinger, Helen Desaulniers, Ted Leslie, Sheila McCoy, Mimi Nguyen, and Walter Vance.

Related GAO Products

Central States Pension Fund: Investment Policy Decisions and Challenges Facing the Plan. GAO-18-106. 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. GAO/HRD-82-13. Washington, D.C.: April 28, 1982.