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The Special Financial Assistance Program Is Saving Union Pension Plans with Ullico’s Help

August 31, 2023

A sizable number of multiemployer pension plans have financially struggled for decades, owing to an imbalance between the number of union members paying into the plans and those collecting benefits. The reasons for the imbalance are complex. Historical, social, economic, and legislative events, including deregulation, undermined collective bargaining and stifled union growth, putting many plans in dire straits. As liabilities mounted, these plans faced increasing difficulty in funding pension benefits. In some cases, retired workers experienced benefit reductions or the suspension of benefits altogether.

“The situation was unsustainable and, frankly, unfair to the workers who did their part and expected those benefits to be there when they needed them,” said Ed Smith, CEO and Chairman of the Board of Directors for Ullico Inc.

For years, the National Coordinating Committee for Multiemployer Plans (NCCMP) lobbied Congress to provide relief for affected retirees, many of whom are elderly, unable to work, and at-risk of sliding into poverty without their pension benefits.

“NCCMP came up with many solutions, but anti-union forces prevented any action, which only exacerbated the dilemma,” said Smith, who is also a member of NCCMP’s board of directors.

Then, the political winds shifted. An opportunity emerged, by way of the American Rescue Plan (ARP), to help union pension plans regain their footing and remain solvent for decades to come. Signed into law by President Biden in 2021, the ARP called for the creation of a Special Financial Assistance program (SFA) designed to provide one-time grants to financially troubled pension plans.

“It is a huge triumph for workers,” says Smith. “I’d count it as one of the labor movement’s biggest victories.”

Investment Vehicles That Meet SFA Program Criteria

Administered by the Pension Benefit Guaranty Corporation (PBGC), the SFA program is expected to protect more than 3 million participants in multiemployer pension plans who faced significant cuts to their benefits.

To ensure SFA funds accomplish their purpose, the PBGC developed criteria for investment of the grant money, which must be primarily invested in liquid, high credit quality, fixed income products.

Specifically, PBGC’s Final Rule requires SFA investments to meet the following criteria:

  • At least 67% of SFA assets must be invested in investment grade fixed income securities, and up to 33% may be invested in return-seeking assets (RSA), such as publicly traded common stock and equity funds.
  • Plans must maintain the minimum 67% allocation in investment grade fixed income for the life of the SFA portfolio and will be subject to periodic PBGC audits.
  • SFA assets must be segregated from a plan’s legacy assets. Legacy, or non-SFA, assets may be invested in sectors offering higher expected returns.
  • Plans must pay benefits and expenses out of the SFA portfolio until this portfolio is depleted, and then withdraw such needed funds from their legacy portfolios.

Not every investment fund vehicle meets the requirements set by the PBGC. Therefore, plan trustees and the consultants who advise their investments should perform due diligence before selecting fixed income vehicles for their SFA allocations. In instances where the PGBC regulations seem ambiguous, some investment vehicles might appear to meet the criteria, but trustees should determine whether their SFA funds are exposed to unnecessary risks.

“If I were a trustee for a pension fund, especially for a program getting a lot of attention, I’d be more comfortable following the letter, not just the spirit, of the regulations” said Steve Eason, President and Director of UIA Investment Management, LLC (UIA-IM), a subsidiary of Ullico Investment Advisors, Inc. (UIA).

That’s why, in keeping with its mission to protect unions, UIA has launched a commingled fund to meet the specific requirements for SFA allocations. The Ullico SFA Fixed Income CIF, which is sponsored by Hand Benefits & Trust Company and advised by UIA, meets every constraint the PBGC has put on portfolios with SFA funds.

Ullico’s Fixed Income Vehicles Cater to Multiemployer Pension Plans

“It’s true that other investment managers are capable of handling SFA funds, but none of them combine decades of professional knowledge with an explicit dedication to the labor movement,” said Joe Linehan, President of UIA.

In fact, Ullico’s dedication to the labor movement began over 95 years ago, when labor leaders founded the company to provide life insurance for union members who were often denied coverage because they worked in high-risk jobs. Since then, the Ullico family of companies has responded to the needs of the union market by launching additional insurance and investment products, including Separate Account J (J for Jobs) and the Ullico Infrastructure Fund (UIF).

 “Our investment professionals are as capable and talented as anyone on Wall Street, but our Wall Street competition doesn’t care that you’re a union,” said Linehan. “When you combine our mission and experience, as well as our involvement in the SFA program from its inception – that’s why unions should work with us.”

Practically speaking, when it comes to the SFA program, UIA will work with unions to manage contributions that other managers might consider too small. But the SFA commingled fund advised by UIA is just one vehicle the company offers to multiemployer pension plans. UIA also manages custom portfolios for plan sponsors.

“Whatever size the union pension plan, we can assist in managing the fixed income portfolio,” says Eason. “Our competitors may not be so flexible, but it’s been our mission since day one to work with all union pension funds.”

Less financially troubled pension funds with greater legacy assets will receive a smaller SFA grant which will be spent relatively quickly to pay down their liabilities.  Other more significantly underfunded pension funds will depend on SFA funds for a longer period of time. In either case, UIA will propose an appropriate strategy to meet each pension fund’s funding needs.

“Our team offers a lot of experience managing custom portfolios designed to meet a specific liability schedule,” said Eason. “We work with clients to model their liabilities for the next 30 years, then propose a portfolio designed to pay off the plan’s liabilities. We may even be successful in building a portfolio that outperforms the required SFA rate, in which case the pension fund will be viable even longer than the projected 30-year horizon.”

Designing a successful SFA investment program requires broad fixed income market expertise. UIA can build diversified portfolios of corporate bonds, agency mortgage-backed securities, and asset-backed securities that seek to provide an attractive return while meeting the individual client’s needs for liquidity to pay benefits.

Joe Linehan adds, “UIA’s experienced fixed income team, involvement in the SFA program from its inception, and ownership by the American Labor Movement set us apart from our Wall Street competition.”


The Ullico SFA CIF is not a mutual fund. Its shares are not deposits of Hand Benefits & Trust Company, a BPAS company, or Ullico Investment Advisors, and are not insured by the Federal Deposit Insurance Corporation or any other agency. The CIF is a security which has not been registered under the Securities Act of 1933 and is exempt from investment company registration under the Investment Act of 1940. As market conditions fluctuate, the investment return and principal value of any investment will change. Diversification may not protect against market risk. There are risks involved with investing, including possible loss of principal. Before investing in any investment portfolio, the client and the financial professional should carefully consider client investment objectives, time horizon, risk tolerance, and fees. The Ullico SFA CIF is offered only to qualified institutional and accredited investors.