Thread: MEP Watch
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Old 03-08-2019, 08:24 AM
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Mary Pat Campbell
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
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Inaction In Action on Multiemployer Plans
After decades of allowing multiemployer plans to follow their own rules and/or whims when it came to funding we have this staged event to plant more bailout seeds:

After skimming through the testimony (and even that was painful) this second brief clip summed it up for me:


No villains here, except for those who would question a bailout and are painted that way. No blame for regulators, actuaries, trustees, the media, and even trusting participants. Bail everyone out before a bigger mess gets its hearing.

Full hearing:
Mr. Joshua Shapiro
Vice President, Pensions
American Academy of Actuaries
Washington , D.C.
Download TestimonyShapiro Disclosure

Ms. Mary Moorkamp
Chief Legal Officer
Schnuck Markets, Inc.
St. Louis , MO
Download TestimonyMoorkamp Disclosure

Mr. James Morgan
Blue Island , IL
Download TestimonyMorgan Disclosure

Dr. James Naughton
Assistant Professor Of Accounting Information & Management
Kellogg School of Management at Northwestern University
Evanston , IL
Download TestimonyNaughton Disclosure

Mr. Glenn Spencer
Senior Vice President
U.S. Chamber of Commerce
Washington , D.C.
Download TestimonySpencer Disclosure

Dr. Charles Blahous
J. Fish And Lillian F. Smith Chair And Senior Research Strategist
Mercatus Center at George Mason University
Arlington , VA
Download TestimonyBlahous Disclosure

Ms. Mariah Becker
Director Of Research And Education
National Coordinating Committee for Multiemployer Plans (NCCMP)
Washington , D.C.
Download TestimonyBecker Disclosure

Testimony from the Academy:
Testimony of Josh Shapiro, MAAA, FSA, EA
Vice President, Pension
American Academy of Actuaries
Submitted for the Record
United States House Committee on Education and Labor, Subcommittee on Health,
Employment, Labor and Pensions, Hearing:
“The Cost of Inaction: Why Congress Must Address the Multiemployer Pension Crisis”
March 7, 2019

[an excerpt:]Summary of Current System Challenges
The multiemployer pension system consists of roughly 1,250 active plans that cover between 10
million and 11 million people. Data available from the Department of Labor shows that approximately
65 percent of multiemployer plans are not in any zone status (often referred to as the “green zone”), 10
percent are in endangered status, 15 percent are in critical status, and 10 percent are in critical and
declining status. The plans in critical and declining status are eligible to apply for benefit reductions
under MPRA, though not all plans are able to meet the criteria for approval. MPRA contains limits on
the benefits that may be reduced, and for many plans the maximum reductions allowed under MPRA
would be insufficient to eliminate the projected insolvency. Among the 15 percent of plans that are in
critical status, some are projected to recover and emerge from critical status, while others have
exhausted all reasonable measures and do not expect to recover. Some in the latter category of these
plans are likely to be certified in critical and declining status in the future.
Analysis prepared by the Society of Actuaries in 2016 found that between 2009 and 2013, the average
contribution paid into multiemployer plans per active participant increased by an average of 11.4
percent per year. During this same period of time, the average normal cost per active participant, which
is a measure of the benefits that participants are earning, remained essentially flat. The data suggest
that employers and employees agreed to increase the average negotiated contribution rate by more than
50 percent over that four-year period, while the benefits that participants earned remained unchanged.
These figures are for all multiemployer plans, and it is likely that among highly distressed plans, the
average contribution rate increases were even greater and that the benefits earned by participants in
those plans tended to decrease.
The trustees of the plans that are projected to be insolvent face a very difficult situation. Because,
generally, their populations of active participants and employers have shrunk, the contribution rate
increases and benefit accrual decreases that they have adopted have not been sufficient for recovery.
The contribution rate increases needed to achieve recovery are so great that if they were imposed, the
employers would be unable to remain in business or would choose to withdraw from the plans. For the
plans that are unable to meet the criteria for benefit reductions under MPRA, they have no alternative
other than to spend down their assets and wait for insolvency to occur.
Unlike a single-employer plan, a multiemployer plan that is projected to become insolvent continues to
pay full benefits until the insolvency occurs. Then, when a multiemployer plan finally exhausts its
assets and begins to receive PBGC assistance, all participant benefits are reduced to the PBGC
guarantee level. A middle-income participant who participated in a multiemployer plan over his or her
full career might have earned a pension of $25,000 per year from the plan. The PBGC guarantee would
cover approximately half of this pension (about $12,800), meaning that the retiree would have a 50
percent benefit cut when the plan runs out of assets. Further, the PBGC Multiemployer Program lacks
the resources needed to support even this guarantee level. When that program runs out of money—
which is projected to occur in less than ten years—benefits for affected retirees will be reduced to only
pennies on the dollar

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