Rep. Kaptur, Sen. Brown, Others Seek GAO Inquiry Into Handling of Central States Pension Fund Investments

Press Release

Congresswoman Marcy Kaptur (D-OH) and Senator Sherrod Brown (D-OH) today released a letter to the Government Accountability Office, the federal government's investigative agency, calling on a comprehensive "review of the investment decisions of the Central States, Southeast and Southwest Areas Pension Fund." News reports of the apparent mishandling of the Central States Pension Fund investments, which now threaten the future livelihood of roughly 400,000 retirees, prompted the letter, which was signed by 10 Senators and 41 Members of Congress.

"It's astonishing to now read about how Wall Street firms hired by Central States invested retirees' pension funds in Iraqi banks in 2008, right in the middle of a full-scale war in Iraq," said Kaptur. "Or how they invested in unstable Russian banks, when the economy there is in shambles, or how they sunk $1.4 billion into risky Single-A-rated mortgage-backed bonds in the middle of the housing meltdown. Something is simply wrong, and the GAO will get to the bottom of this."

In early May 2016 the Department of Treasury rejected the application of the Central States Pension Fund to restructure benefits paid to 277,000 retirees -- 49,000 of whom are Ohioans -- under terms of Multiemployer Pension Reform Act (MPRA) of 2014. Central States subsequently decided not to reapply with an amended application, which will likely result in the fund's insolvency within a decade.

The MPRA, the most significant change to pension law in the 41-year history of the Employee Retirement Income Security Act (ERISA), allows certain multiemployer pension plans that are in critical and declining financial status to cut already earned retiree pension benefits while a plan is still solvent. Four other pension funds currently in critical and declining financial status have also filed applications to cut benefits to current retirees, including Cleveland's Ironworkers Local 17, the second plan to file in late December 2015; a decision on the Ironworkers Local 17 application is expected by August 4, 2016.

The sheer size and scope of a potential insolvency of the Central States Pension Fund, with $16.8 billion in assets and $35 billion in retiree obligations, threatens the financial solvency of the Pension Benefit Guarantee Corporation (PBGC).

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