Compliance March 17, 2016

A&P Grocery Pension Plans Get PBGC Bailout

The Pension Benefit Guaranty Corporation will pay retirement benefits for more than 21,000 current and future retirees of the Great Atlantic & Pacific Tea Co.
Reported by

The Great Atlantic & Pacific Tea Co. supermarket chain based in Montvale, N.J., commonly known for its A&P brand, is the latest employer to require bailing out of its pension plan by the Pension Benefit Guaranty Corporation (PBGC).

PBGC is stepping in because A&P has sold the majority of its assets in bankruptcy proceedings and most of the buyers declined to keep the plans going. The three plans that PBGC will assume ended on Nov. 30, 2015.

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“The agency will pay all pension benefits earned by A&P retirees up to the legal maximum of $60,136 a year for a 65-year-old,” the pension insurer explains. “Retirees will continue to get benefits without interruption, and future retirees can apply for benefits as soon as they are eligible.”

During the transition of shifting benefit payment responsibility to PBGC, participants who are in pay status in the company’s pension plans will continue to receive benefits from A&P and its affiliates.

PBGC is becoming responsible for the following pension plans:

The Great Atlantic & Pacific Tea Co. Inc. Plan, which is 55% funded and has 14,783 participants. PBGC estimates that the plan has $135 million in assets to pay $244.4 million in benefit liabilities. The agency expects to cover $105.6 million of the $109.4 million shortfall.

The Pathmark Stores Inc. Pension Plan, which is 64% funded and has 6,278 participants. PBGC estimates the plan has $327.2 million in assets to pay $509.5 million in benefits liabilities. PBGC expects to cover nearly all of the $182.3 million shortfall.

The Delaware County Dairies Inc. Hourly Employees Pension Plan, which has no assets and covers eight people. The plan owes participants $100,000 in benefits. PBGC will cover the entire amount.

The New York-New Jersey Amalgamated Pension Plan for A&P Employees, which has not been terminated and is an ongoing plan. This plan is jointly administered by UFCW Local 464A and Acme Markets Inc. and has been renamed the New York-New Jersey Amalgamated Pension Plan for ACME Employees.

The historic A&P company was founded in 1859 and at its height operated a number of supermarket brands such as SuperFresh, Pathmark, Waldbaum’s and the Food Emporium. On July 19, 2015, A&P and 20 of its affiliates filed for Chapter 11 protection in the U.S. Bankruptcy Court in Manhattan. It was the company’s second Chapter 11 filing in five years. A&P sought bankruptcy protection in December 2010 to restructure its operations and finances. While A&P came out of that previous bankruptcy with its pension plans ongoing, the company was unable to sustain profitability.

For more information, visit www.PBGC.gov. 

Data & Research March 17, 2016

More Higher Ed. Institutions Using 401(k)s

Transamerica attributes this, in part, to more institutions using plan advisers.
Reported by

The era of non-ERISA 403(b) multi-provider arrangements is going away in the higher education market, according to research from Transamerica Retirement Solutions.

The firm contends that change is happening as plans partner with an adviser or consultant. Greater workforce mobility between corporate and higher education among researchers and staff, the rise of the for-profit higher education sector, and economic pressure to streamline retirement benefits also contribute to the trend.

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According to “Retirement Plans for Institutions of Higher Education,” for the first time, fewer than two-thirds of institutions are sponsoring a 403(b) plan, and nearly half (46%) are sponsoring a 401(k) plan. The percentage of institutions offering plans based on individual contracts only has dropped to 40%.

Today, nearly half (48%) of plans in higher education identify themselves as Employee Retirement Income Security Act (ERISA) plans. Two-thirds of institutions rely on one exclusive provider for their plan. Only 24% recognize their program as a non-ERISA arrangement.

The long tradition of universal availability of 403(b) plan salary deferrals impacts the design of all defined contribution plans at higher education institutions. At more than half (55%) of the higher education institutions, employees are eligible to make salary deferrals immediately upon hire.

Many institutions in 2015 allowed part-time staff and faculty to participate in their plans for the first time as they implement new age and service eligibility requirements—often in conjunction with the introduction of a new 401(k) plan. Age 21 is now the most common requirement for plan entry—at 39% of plans. Immediate eligibility for employer contributions is no longer the norm (offered by only 44% of institutions). Three in ten plans offer non-elective employer contributions and an additional 25% offer matching contributions, often up to 10% of pay.

NEXT: Auto enrollment and stretching the match

Forty-four percent of plans enroll participants automatically, and an additional 27% are contemplating adding automatic enrollment. More than four in 10 plans (42%) enroll participants at 5% of pay or better. Only 8.5% of participants opt out.

Most institutions rely on a target-date series or custom fund as their default election. Currently, among higher education plans with a qualified default investment alternative (QDIA), 34% use a target-date fund series and 25% rely on a custom asset allocation model.

It appears higher education institutions have embraced stretch-the-match strategies to encourage employees to save more. Employers who matched 10% of pay or more now make up 29% of employers with a matching contribution, up from 18% in 2014.

Private institutions set themselves apart with three-year vesting schedules, and public institutions stretch vesting schedules to 10 years.

Three in ten institutions offer plan loans; loan usage climbed to 22% but hardship withdrawals are contained.

The report is based on a survey of 276 higher education institutions and is available here.

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