International Pension Fund Establishes Rehabilitation Plan

Summary of Plan changes

JOURNAL: ISSUE 2 - 2016

Since 2010 the International Pension Fund (IPF) has been operating under a Funding Improvement Plan designed to restore its funding and ensure its long-term financial stability. However, a continued contraction in the construction industry has led to historically low work hours for IPF participants and fewer contributions. As you can see in the chart below, despite a 5% increase in hours for 2015, the IPF has experienced a 43% cumulative decline in hours since the financial crisis began in 2008. In addition, as with other funds, the IPF has faced a challenging investment environment for the last two years. As a result, on January 1, 2016 the Plan was certified by its actuary to be in critical status and, as required by law, the Board adopted a rehabilitation plan (the "Rehabilitation Plan"). 

The Rehabilitation Plan does not affect benefits currently being received by IPF pensioners and their beneficiaries. It also does not affect the benefit accruals currently earned under the Plan. The following paragraphs describe these changes and summarize the materials published in the Spring 2016 issue of the IPF Retirement Blueprint and in the required 204(h) notice from the Fund office mailed on April 15, 2016.

Early Retirement

The following changes to the IPF Early Retirement benefit do not apply to eligible applications received on or before May 31, 2016 with a pension start date effective on or before June 1, 2016. Please be aware that in order to have a pension start date on or before June 1, 2016 you must retire on or before that date with no intention of returning to work. For example, if your pension start date is June 1, 2016, you cannot work during the month of June. If you do, your benefit will be recalculated under these new rules.

The Rehabilitation Plan changes three areas of the Early Retirement Pension:

• It eliminates the unreduced Early Retirement Pension
• It applies greater reductions for Early Retirement Pensions.
• It eliminates Early Retirement Pensions for Inactive Vested Participants

Under the Rehabilitation Plan, the unreduced Early Retirement Pension is eliminated and the following reduction factors will apply to retirements between age 55 and 64, providing approximately the same benefit the participant would have received had they waited until normal retirement age to retire. 

Inactive Vested Participants are no longer eligible for an Early Retirement Pension under the Plan. They are, however, still entitled to receive a pension at normal retirement age. An Inactive Vested Participant may become entitled to an Early Retirement Benefit at any time if, subsequent to their inactivity, they earn at least three years of Future Service Credits with a contributing employer. They will then be eligible to receive an Early Retirement Pension benefit subject to the same reductions for active participants, as described above.

Disability Retirement

Between the ages of 60 and 64, the disability benefit will be subject to an annual actuarial reduction factor of 8%. There will be no additional reduction for years prior to age 60. The reduction factors will be as follows:

Post-Retirement and Lump Sum Death Benefits

For pensioners with an effective date of June 2, 2016 and later, the "Pop-up" benefit under either a 50% Joint and Survivor Annuity or 75% Joint and Survivor Annuity is no longer available. This means there will no longer be an increase in the monthly pension amount payable to a retiree if the retiree's spouse predeceases the retiree. Similarly, for new applicants who reject the Joint and Survivor Options, the Five Year (60 month) guarantee of the Regular Payment Option no longer applies. This means the Plan will no longer pay pension benefits to the pensioner's beneficiary after the participant's death, regardless of the number of monthly pension payments made.

Beginning April 15, 2016, the pre-retirement lump sum death benefit of the Plan is capped at a $5,000 maximum benefit.

If unmarried and eligible, the participant's non-spouse designated beneficiary will receive a lump sum payment of the employer contributions made on the participant's behalf up to a maximum of $5,000.

If married and eligible, the participant's spouse will receive the Joint and Survivor annuity benefit, unless the actuarial value of the benefit is $5,000 or less, in which case he or she can reject such annuity benefit and receive the benefit in a lump sum. 

Currently, if the actuarial equivalent of a benefit is less than $10,000, a participant has the option to receive this benefit in lump sum. Effective April 15, 2016, only benefits with an equivalent of $5,000 or less can be paid in lump sum.

Merged Plans

The IPF provides benefits to certain participants who came into the IPF by virtue of mergers between the IPF and their pension plan. The IPF has been administering the benefit earned by those participants under their former plan in accordance with the rules of that plan. As of the effective dates stated herein, those participants' benefits will be calculated pursuant to the rules of the IPF. As under IPF, if the former merged plan offered a lump sum benefit, the IPF is only permitted to pay lump sum benefits up to a maximum of $5,000.

Noncovered Masonry Employment

These Plan provisions which have been in effect since June 1988 remain in effect and unchanged. Should you have questions regarding these changes, please contact the Fund office via e-mail at dstupar@ipfweb.org or write to:

International Pension Fund
620 F St., N.W., Suite 700
Washington, DC 20004