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  #811  
Old 03-12-2019, 10:04 AM
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Mary Pat Campbell
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CHICAGO SYMPHONY ORCHESTRA

https://www.nytimes.com/2019/03/11/a...ra-strike.html

Quote:
The Chicago Symphony Goes on Strike Over Pension Plan

Spoiler:
A new round of labor upheaval hit the classical music world on Sunday night, when the musicians of the Chicago Symphony Orchestra, one of the finest ensembles in the nation, went on strike in an effort to preserve their defined-benefit pension plan.

The players — who are among the best-paid in the field, earning a minimum annual salary of $159,000 last season, and often more — began walking a picket line outside Orchestra Hall on Monday morning.

In recent years, ticket sales have covered an ever-smaller portion of the cost of putting on classical performances. That has put pressure on orchestras to raise more money from donors — but also to try to cut expenses, leading to tensions with their unions. This fall, the Lyric Opera of Chicago’s orchestra went on a brief strike and wound up agreeing to a contract guaranteeing fewer weeks of work. Two seasons ago, the Philadelphia Orchestra, the Pittsburgh Symphony and the Fort Worth Symphony found themselves on strike simultaneously.

There are several areas of dispute in the negotiations in Chicago, which have gone on for 11 months without an agreement, but the pension is the main sticking point. The orchestra’s management and board have warned that the growing expense of the current pension plan, which guarantees a set benefit for life after retirement, is unsustainable. They said in a statement that the orchestra contributed $3.8 million into the musicians’ pension fund this year — up from $803,000 just two years ago because of new federal requirements — and that those annual contributions were projected to continue rising sharply.

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Management’s proposal has called for switching the musicians into a defined-contribution plan, similar to a 401(k), in which the orchestra would put a set amount of money into individual retirement accounts for the players, who could invest it as they chose.

Cynthia Yeh, a percussionist on the players’ negotiating committee, said in a statement that the defined-benefit plan “has been the hallmark of the orchestra’s benefits package (and those of other leading orchestras) for over 50 years.” She said the board’s proposal “strips the membership of that guaranteed benefit and shifts the investment risk to the individual member.”

Helen Zell, the chairwoman of the orchestra’s board, said in a statement that “it would be irresponsible for the board to continue to authorize a pension program that jeopardizes the orchestra’s future.”

While many other industries have shifted to cheaper defined-contribution plans in recent decades, defined-benefit plans remain the norm at the nation’s largest orchestras — and players around the country have made preserving them a priority. But many are underfunded. The American Federation of Musicians and Employers’ Pension Fund, a large multiemployer plan covering thousands of musicians, is currently considered “in critical status,” and if its condition worsens, it could trigger a rare move to cut the benefit payments for those already retired.

Last week, as the deadline the Chicago players set for an agreement neared, the orchestra’s eminent music director, Riccardo Muti, wrote a letter supporting the musicians to Ms. Zell and Jeff Alexander, the orchestra’s president. “As music director and a musician of this orchestra, I am with the musicians,” Mr. Muti wrote, urging the management to “remember that theirs is not a job but a mission” and speaking of the performers’ need for “tranquillity and serenity.”

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Mr. Muti is scheduled to lead the orchestra in a program of Rossini, Vivaldi, Beethoven and Wagner on Thursday.
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  #812  
Old 03-15-2019, 11:45 AM
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This one is about retirement in the U.S. in general, touching a little on MEPs and public pensions.... but anyway, sounds like she read a book so that I don't have to.

https://www.forbes.com/sites/ebauer/...M#3ba393695e90

Quote:
Retirement Crisis Update: Is It Really All 'Downhill From Here'?

Spoiler:
Someday, I will write a book about the evolution of the retirement system from employer-sponsored to -- well, whatever form it takes after our current transitional period. It will attempt to promote the understanding that the existence of the employer-sponsored Defined Benefit plan in the form that it took in the second half of the 20th century was an anomaly, a product of those specific historical circumstances, which faded when those circumstances changed.

It will sell, oh, maybe a dozen copies --

because there will be no villain, and we love a story with a villain.


And that's what books on retirement policy and changes in retirement benefits love to give us -- more specifically, the recently-published Downhill From Here: Retirement Insecurity in the Age of Inequality, by Katherine S. Newman, which begins its villain-narrative on the very first page, in the second sentence of the second paragraph:

Recent federal legislation, for instance, has enabled massive cuts in pension benefits.

Whoops! What's that? Federal legislation is chock-full of anti-cutback rules for private-sector pensions, and the process of elimination of future accruals for those plans has largely played itself out. But that's not what Newman is referring to.

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Yes, she addresses the move away from defined benefit pensions among private-sector employers, and the immoral destruction (as she characterizes it) of the "sacred" obligation of employers to care for retirees, although she acknowledges that only in cases of bankruptcy were pension benefits lost, and then only above the PBGC maximum benefit level. But she objects to companies phasing out healthcare coverage and life insurance for retirees, companies such as United whose plans were distress-terminated in bankruptcy not restoring benefits after a subsequent return to profitability, and companies such as Verizon purchasing annuities for their retirees rather than continuing to pay pensions directly -- the last of these a peculiar complaint as retirees continue to receive protection against insolvency, albeit through state guaranty funds rather than the PBGC.

But this is only one of her complaints. The "recent federal legislation" was not about traditional employer pensions at all, but about the prospect of benefit cuts for Central States multi-employer pension participants, cuts which were proposed by the plan's management as part of an overall plan to keep the plan solvent, in keeping with the provisions of 2014's Multiemployer Pension Reform Act (those proposed cuts were rejected by the Treasury Department not for being too steep but because the overall proposed changes were insufficient to keep the plan solvent).

Now, as readers will recall from my December series on the issue, a significant number of multi-employer plans are struggling to stay afloat, and the multi-employer side of the PBGC is at risk of becoming insolvent alongside them. In particular, the Central States Teamsters' Plan's severe underfunding had multiple causes: in part, yes, the trucking deregulation that led to a shrinking number of participating employers, and the bankruptcy of many of those employers, as Newman chronicles, but also fundamental flaws in the benefit design that led to benefit promises in excess of what employer contributions could reasonably fund, and a regulatory structure that prevented the plan from dialing down its benefit promises when it became apparent that they were unsustainable -- issues that Newman does not acknowledge because she is too invested in the narrative that workers earned their benefits fair-and-square. Newman also appears skeptical of the government's move to take control of the Central States fund in the wake of mafia-fueled corruption (again, see my prior article for details), using an interviewee to express the opinion that the charges were "phony" and failing to omit the key detail that at the time of the government takeover, the plan was only 40% funded, and, instead, lays the blame at the feet of the money managers who she claims were "wrecking the pension fund" (p. 31). Although, in her defense, it may be the case that the book had already been sent to the printer when the GAO study showing no such mismanagement was completed last summer, it is still reckless to claim that Goldman Sachs caused the Central States funding crisis. And, what's more, none of these villains can explain the similar pending insolvency at the United Mine Workers plan.

Newman also identifies another way in which pension benefits are under attack: municipal plans are at risk due to bankruptcies. Here her villain-finding is even harder to understand: Detroit, as a city government, has struggled for decades with the loss of population and tax base, and all the more so because so many of those who have stayed are mired in poverty. The city has struggled to combat arson among its abandoned homes and works to demolish those homes in a sufficiently acceptable timeframe. Yet rather than recognizing that underfunded defined benefit pensions are not sustainable in cities with declining population, she casts her blame on this faceless entity, Detroit, as well as the state of Michigan for insufficiently enforcing city tax-collection and being too stingy with funding in general, bankers for "baiting" the mayor into poor investment decisions, and the city's emergency manager during the bankruptcy process for being unwilling to sell DIA paintings to avoid pension cuts (p. 99).

So far this appears to be nothing other than a hate-read. But there's more to her book, and the more compelling portion of the book begins when here tales of victimization end, though not in the way she intends. She profiles two communities: Opelousas in Louisiana and Ogden in Utah.

Opelousas, a largely-black town of 18,000 about a half-hour drive from the nearest larger city, gains her attention because it is one of the poorest cities in Louisiana, with very little in the way of economic opportunity. Its retirees are poor, and their work histories are often too scattered to even collect much in the way of Social Security, in some cases because they worked off-the-books. They are also not necessarily "retired" but continue to work in some fashion or another, and varyingly support, or receive support from, their adult children, and, at the same time, receive assistance from local faith communities, though the poverty of the area limits the aid they can provide.

But here's what's striking: in 2010, she reports, the Opelousas-Eunice statistical area had an elder poverty rate of 28.4%, the highest proportion in the entire United States. That's bad, to be sure. But 43% of the city's overall population lives in poverty, so over-65s are less likely to be in poverty than their children and grandchildren. At the same time, the city has been bleeding population -- Wikipedia reports a 2000 census population of 22,860, followed by annexations in 2004 that should have resulted in a population of over 25,000; in reality, the 2010 census count was 16,634, with a 2016 estimate of nearly the same, or a drop of something like a third. What happened isn't explained either at Wikipedia or in Newman's book, but I have to believe that that's part of the story that can't readily be left out.

The book then shifts to profiling Ogden, which is the "most egalitarian region in the state and in the United States as a whole" (p. 213). (This chapter is credited to Rebecca Hayes Jacobs, who is identified in the acknowledgments as a doctoral student who actually undertook much of the book's research and interviews.) This town, with a population of 87,000, has benefitted from several government employers, including an Air Force base, the IRS, and a university, and its historic role as a railway hub has meant that, though still heavily Mormon in character, it is relatively more diverse in religion than the state as a whole.

Jacobs describes the extensive role that the LDS church plays in the community: women are far more likely to stay at home with their children; both men and women are heavily involved in the church through such roles as "visiting teacher", and remain so after retirement; and the church provides for its members' material needs through food pantries and other support as well as networking and other job search support. The church and its members do also extend their volunteer service beyond church members, however, residents who are not a part of the LDS community express feeling like outsiders, or even, if ethnic minorities, feel the sting of discrimination. Is there a non-LDS community life that these interview subjects participate in? It's not clear.

But what of retirement benefits?

In the case of Opelousas, the poor retirees she profiled never had a chance at employment at the sort of jobs which, even in the past, provided traditional pensions. In Ogden, the poster-child happy retired couple Jacobs begins the chapter with, is perfectly happy with a 401(k) plan.

These are not stories of the loss of defined benefit pensions, of the misdeeds of corporations implementing 401(k) plans, of the cruelty of benefit-cutters abdicating their sacred duty to care for the elderly. These are stories of communities, of people old and young, trying to get by the best they can.

And, again, I will once again flog my own Social Security reform plan, which refocuses the system on alleviating poverty, and suggest that risk-sharing systems like what the State of Wisconsin has adopted for its employees, should be a part of the way forward, but will also remind readers that we need to think of where we are now fundamentally as a time of transition to something new, rather than a crisis in which we need to restore the old.


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  #813  
Old 03-15-2019, 05:02 PM
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LAWSUIT

https://www.quarles.com/publications...l-assumptions/
Quote:
New Litigation Relating to Pension Plan Actuarial Assumptions
Spoiler:
The use by Pension Plans of Mortality Tables and Interest Rates from the 1970s and 1980s is being challenged in the new litigation.

Dated actuarial assumptions challenged

Defined benefit pension plans offer a number of alternative forms of benefits such as single life and joint and survivor benefits. Many defined benefit pension plans also offer early retirement benefits. In converting between benefit forms or calculating early retirement benefits, pension plans must use actuarial assumptions, specifically mortality tables and interest rate assumptions. Often these actuarial assumptions are based on mortality tables and interest rates from the 1970s and 1980s and do not reflect the changes in interest rates or the increasing average life spans that have occurred over time. The continued use of interest rates and mortality tables from the 1970s and 1980s is being challenged in four lawsuits as a violation of ERISA and the Internal Revenue Code, both of which require the actuarial assumptions used to convert benefits and calculate early retirement benefits to be reasonable.

The lawsuits were filed in December 2018 by a single plaintiff's law firm against Metropolitan Life, American Airlines, Pepsi and US Bank Corp. The law firm appears to be soliciting participants in other large pension plans as well. The law firm is able to identify pension plans with older mortality and interest rate assumptions using the public filings of the defined benefit pension plans (IRS Form 5500s). While any individual participant's benefit might be changed only modestly, a class action affecting both prior and future payments could result in substantial additional costs for pension plans as well as significant attorney's fees to the plaintiff's law firm bringing the lawsuits.

Read more Insight & Impact from March 2019:

States Push Back Against Restrictive Covenants in Employment Agreements
NLRB Returns to Its Long-Standing Independent Contractor Test
Be Prepared for New H-1B Lottery Rule Effective April 1, 2019

Impact

Many employers have not reconsidered the actuarial assumptions being used to convert between alternative forms of benefit and to calculate early retirement benefits in their defined benefit pension plans for a number of practical and technical reasons. However, in view of the recent litigation, employers with defined benefit pension plans should review the actuarial assumptions being used for these purposes with their attorneys and actuaries to determine whether it is appropriate to revise the assumptions.
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Old 03-20-2019, 06:38 AM
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CHICAGO SYMPHONY ORCHESTRA

https://www.chicagoreader.com/chicag...t?oid=69100213
Quote:
CSO musicians strike to retain their pensions
Symphony Center is silent as the orchestra hits the street.

Spoiler:
You can always find great musicians on the streets of Chicago, but not usually members of the Chicago Symphony Orchestra. But now those performers are walking a picket line, striking mostly for something American workers of the last century commonly had: a dependable pension.

That would be a pension that provides an established monthly income—a set amount that continues, often with cost-of-living increases, for as long as the worker lives. Pensions like that used to be one of the key benefits at American companies and one they were proud to offer, back when it was understood that workers who gave their best years to a job deserved a secure retirement.

Then, as the 21st century approached, things changed. While the people at the top of the biggest corporations—and the corporations themselves—made more and more money, it somehow became too much of a burden on those businesses to provide their workers with what is now known as a "defined benefit" plan. Employers began offering a different kind of retirement plan, one that would let them shed the responsibility of providing a guaranteed income for their employees' golden years. They called it something that sounded similar, but was, in fact, very different: a "defined contribution" plan.

Under this new plan, the employer would put a certain amount of money into a retirement fund for each employee every pay period and be off the hook for anything else. The money would be invested (workers would typically get to choose from a menu of investment possibilities), but whether those investments would grow enough to provide a decent retirement income would no longer be the employer's concern. The risk that they might not was transferred entirely to the worker.

This "defined contribution" plan is what most private-sector employees have now, if they're lucky enough to have any employer- funded retirement benefits. If you have a 401(k) at work, it's what you've got.

But musicians at the nation's half-dozen top orchestras, including the CSO—musicians who excel as much in their field as, say, the prized players on Major League Baseball teams—have been able to hang on to the old arrangement, which they say is a crucial recruiting tool in a highly competitive market for new talent. Until now.

Which brings us to the picket line. In contract negotiations that have dragged on for nearly a year, the Chicago Symphony Orchestra Association, which manages the CSO and employs the musicians, has made it clear that it intends to dump the defined benefit pension.

Here's how management put it in a statement issued in response to the strike, which began when the previous contract ran out at midnight on March 10: "As has occurred with most Defined Benefit Plans across the country, the financial obligations to continue this plan have become an increasing and significant financial burden for the Association. It must shift and modernize the type of retirement benefit offered going forward if it is to protect the musicians and the long-term future of the Chicago Symphony Orchestra for future generations."

So management is proposing to "protect the musicians" by shifting the "significant financial burden" of providing retirement income to them.

There are other issues at stake, including salary increases in what, until recent years, was the best-compensated orchestra in the nation. Base salary last season was $159,000. And management has produced a graph that purports to show that, when adjusted for the local cost of living, CSO musicians are still better compensated than their peers, with the possible exception of those in Cleveland.

But the musicians, represented by the Chicago Federation of Musicians, say their pay now lags behind that in San Francisco and Los Angeles, and that, as bassist Stephen Lester put it in an interview last week, "If the trend isn't reversed, the Chicago Symphony Orchestra will be compensated as a second-tier orchestra. And that's unthinkable to us."

Last year, the CSO had a $911,000 operating deficit, and operating expenses of more than $73.6 million, in what management characterized as a successful season, one that "represents a step forward" on the path to a financially sustainable future. Lurking somewhere in the background is a $140 million bond debt, taken on in the 1990s to finance an arguably unnecessary and unsuccessful redevelopment of its Daniel Burnham-designed Orchestra Hall, originally built in 1904.

Still, according to the musicians' fact sheet, "CSO has maintained a strong balance sheet, with a $300 million endowment, $72 million investment fund, and nearly $300 million in net assets. It can afford to maintain the CSO as America's leading orchestra if it chooses to do so."

I called arts consultant Drew McManus, a Chicago-based expert in orchestra management, for his opinion on all this. He told me salaries and other benefits are likely negotiable. The pension issue, on the other hand, in a worst-case scenario, could kill this season (which runs into June) and even extend into the next. The items of contention in past contract negotiations, he said, "pale in comparison." What about the musicians' claim that the CSO needs to keep its defined benefit retirement plan in order to hire the best talent and maintain its status as a great orchestra? "Every other major orchestra offers a similar benefit," he said. "They certainly need to hold on to it to remain competitive." v


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Old 03-20-2019, 12:36 PM
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CHICAGO SYMPHONY ORCHESTRA

https://burypensions.wordpress.com/2...pension-games/

Quote:
Chicago Symphony Pension Games

Spoiler:
The Chicago Symphony Orchestra went on strike last week:
.


.
And it appears to be all about the Defined Benefit pension:

On Friday evening, CSOA President Jeff Alexander wrote in an email to the musicians that the institution’s pension obligations came to $803,000 two years ago, have risen to $3.8 million this year, will reach $5 million to $6 million annually in coming years (according to projections) and will add up to $36 million over the next eight years.

“It’s an amount of cash that we just don’t have to put into the fund,” Alexander said in an interview Monday morning.

He cited two major reasons the pension contribution requirements are climbing: interest rates and mortality tables.

“When interest rates are very low, which they’ve been for the last 10 years, the payments into the funds have to be much higher. These are IRS calculations,” said Alexander. “About two years ago, the official mortality tables were updated, and, of course, people are living longer. And those two factors combined have changed the amount of money we have to put into the plan.”

What about the musicians’ charge that pension plans should have been better funded in the past?

“Hindsight is very good,” said Alexander. “I think the funding that was done at the time over the years — I wasn’t here, of course — was appropriate funding. Perhaps minimum required funding, which all the actuaries we have been dealing with have said (to do). Most companies in the ’90s and 2000s did the same thing — that was the trend.”

5500 filings tell a slightly different story….


Those forms have been online going back to the year ended June 30, 2010 and here are the contributions made as reported on the Schedule SBs:

2010: $2,147,241
2011: $3,289,183
2012: $3,284,986
2013: $2,469,411
2014: $2,568,261
2015: $2,638,112
2016: $828,673
2017: $1,829,067
Incidentally, here are the fees paid to the actuary over those years:

2010: $49,544
2011: $44,793
2012: $52,821
2013: $38,283
2014: $33,270
2015: $33,025
2016: $38,498
2017: $35,444
The benefits, as reported on the Summary of Plan Provisions attachment to the Schedule SB, are relatively good, and improving:



From their latest 5500:

Plan Name: Chicago Symphony Orchestra Pension Plan
EIN/PN: 36-2859355
Total participants @ 6/30/17: 168 including:
Retirees: 54
Separated but entitled to benefits: 10
Still working: 104

Asset Value (Market) @ 7/1/16: $39,722,337
Asset Value (Actuarial) @ 7/1/16: $43,694,570
Value of liabilities (6.15%) @ 7/1/16: $53,604,541 including:
Retirees: $25,560,019
Separated but entitled to benefits: $1,727,015
Still working: $26,307,517

Funded ration (using Actuarial Value of Assets): 81.51%

Asset Value (Market) as of 6/30/17: $43,057,405
Contributions: $1,829,067
Payouts: $3,012,523
Expenses: $283,021

Also from the SB is this assumption about the retirement age:



Though the plan normal retirement age is 65, Segal seems to be assuming everyone retires at age 71 and when you consider the 1.1% factor applied to the market value of assets it points to actuarial gimmicks designed to keep contributions (and PBGC premiums) down which worked well for the last two years reported but may have run their course.


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Old 03-21-2019, 07:37 AM
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BOEING

https://www.forbes.com/sites/kenkam/.../#61ed798e8256
Quote:
Here's What Boeing Pensioners Would Get In The Worst Case

Spoiler:
With Boeing 737 Max 8 jets grounded worldwide, and the search to assign liability in full swing, worried Boeing retirees are asking what happens to their pensions if Boeing does not survive this tragedy . In the worst case scenario, Boeing's pension plan would be taken over by the Pension Benefit Guarantee Corporation (PBGC). If this happens here's what your maximum benefit would be.

For 2019, the PBGC's guarantee limit for the single-employer plan is spelled out here and in the table below.

uncaptioned image
PBGC's 2019 Guarantee Limits

PBGC

If your pension benefit is less than the PBGC's guarantee limit, in all likelihood you will receive the same amount.

The numbers in the table are determined by a formula established by law about 40 years ago. Each year the guarantee limits go up, never down and they are set without regard to the financial condition of the plan.

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Who Makes Up The Shortfall?

At the end of 2018, Boeing's pension plan had assets of $50.4 billion and was underfunded by $15.3 billion, as measured under generally accepted accounting principles.

You may wonder, how the PBGC can pay the same benefits even though Boeing's plans are underfunded. Who makes up for the shortfall?

In researching this question last year for General Electric's pensioners, I spoke to an expert on the PBGC, on background, who explained that the shortfall is made up for by insurance premiums paid by pension funds that are still ongoing. PBGC receives no funds from general tax revenues. Like Fannie Mae and Freddie Mac, the PBGC is not backed by the full faith and credit of the U.S. government. No one knows who would pay if the PBGC couldn’t meet its obligations.

Bottom Line

If the PBGC took over Boeing's pension plan, the financial condition of the Single-Employer plan would suffer, but payments (up to the amounts listed in the table above) would not stop for years to come.

To be notified when I write about specific stocks, like Boeing, that my top analysts cover click here.


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Old 03-21-2019, 07:41 AM
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LUMP SUM

https://www.wpsdlocal6.com/2019/03/2...rees-pensions/

Quote:
It just became easier for employers to dump retirees’ pensions

Spoiler:
(CNN) — Traditional pensions are disappearing in America, and the federal government just made it easier for employers to get rid of them.

With no fanfare in early March, the Treasury Department issued a notice that allows employers to buy out current retirees from their pensions with a one-time lump sum payment. The decision reverses Obama-era guidance, issued in 2015, that had effectively banned the practice after officials determined that lump-sum payments often shortchanged seniors.

Now, advocates for the elderly worry that millions of people receiving monthly pension checks could be at risk.

“Permitting plans — for their own financial benefit — to replace joint and survivor or other annuities with lump-sum payments will reduce the retirement security of both workers and their spouses,” AARP Legislative Council David Certner said.

Since the 1980s, employers have shifted away from offering defined-benefit pensions, which provide a guaranteed monthly income for as long as someone lives in retirement. Instead, employers now favor 401(k) accounts, a finite pot of money that becomes available at age 59.5.

Pensions, which are insured by the federal Pension Benefit Guaranty Corporation in case employers go bankrupt, still cover 26.2 million people across 23,400 single-employer plans. But that number has been shrinking faster than it would naturally as companies close their plans to new hires.

Here’s why: Pensions are big liabilities for companies, which Wall Street ratings agencies don’t like. To remain solvent, pension funds depend on their investments in bonds, stocks and other securities, but recent swings in financial markets serve as a reminder that positive returns are not a sure thing. Pensions are also expensive to maintain. The premiums the PBGC charges per covered employee have more than doubled over the past decade as part of a budget gimmick to fill other government revenue holes.

“Healthy companies throw up their hands and say, ‘why do we bother?'” said Annette Guarisco, president of the ERISA Industry Committee, which represents large employers around regulation of employee benefits. “Because companies are now competing with other companies that don’t offer these benefits to their workers, it becomes a cost that they have to question whether they have the ability to maintain.”

The rise of lump-sum buyouts
Federal law gives employers an out. Companies can offload their pension obligations to the private sector by purchasing an annuity plan for each retiree from an insurance company. Or, for an even cheaper option, they can offer their employees a lump sum up front according to a formula that approximates how much a retiree would receive if they lived an average number of years.

In the insurance world, this strategy is known as “de-risking,” because it transfers pension risk from the company’s balance sheet to an insurance company and to retirees. The lump-sum option became particularly popular starting in 2012, when changes enacted in a 2006 law that made them more financially appealing took full effect.

Ford and General Motors pioneered the practice of offering buyouts to their tens of thousands of current retirees, rather than just those on the cusp of retirement. The insurance firm Towers Watson estimated that about 200 businesses, including big companies like Sears and JCPenney, offered lump sum buyouts that year.

For retirees, taking a lump sum is entirely voluntary. However, behavioral economists have found that people tend to value money that’s right in front of them over money they will get in the future, even if the total over time would be greater. Plus, retiree advocates say that most people aren’t well-equipped with the advanced financial knowledge needed to fully evaluate their options, and often, they’re pressured by family members.

A 2017 study by MetLife found that one in five retirees who took lump sums spent them down within five and a half years, and nearly a third regretted using large chunks of the money for short-term needs like home improvements.

“People get blinded by the amount of money,” said Bill Kadereit, president of the National Retiree Legislative Network. “‘We’ll offer you $400,000,’ and they’re age 65. It’s not that much money at all. But they don’t think about it that way.”

A losing deal for retirees
In 2015, the Government Accountability Office issued a report finding that the rules the IRS had set up around mortality tables and interest rates allowed companies to offer lump sums at a significant discount to the actual value of the pension. Retirees who tried to reinvest the lump-sum payments would almost inevitably lose out — especially women, who tend to live longer than men and are more likely to run out of money in retirement.

But there was no requirement that companies disclose the imbalance, and retirees were taken in by promises from financial advisers that they could do a better job with the money.

“You’ll never be able to replicate the annuity you’re getting from the pension plan,” said Karen Friedman, policy director of the Pension Rights Center. “You’re getting 20% to 30% less than what the pension could buy, and you’re going to try to regain that in the stock market, it’s basically impossible.”

In 2015, after experts and advocates raised these concerns, the Treasury Department announced that it planned to write additional rules around lump-sum buyouts that would be retroactive to the date of the notice. That effectively put an end to the practice of offering lump sums to people who have already retired (offering them at the outset of retirement remained kosher). That is, until March 6, when the Trump administration’s Treasury said it didn’t plan to issue the rules after all.

That move could unleash a torrent of new lump-sum offers. As soon as the notice was issued, legal and financial services firms sent out notices to their clients advertising the benefits of the strategy, and there’s been a lot of interest.

“The phones are ringing,” said Wesley Wickenheiser, a principal with the benefits consultant Findley. “Anywhere from smaller clients from around the country to those with many many thousands of retirees.”

Josh Gotbaum served as director of the PBGC from 2010 until 2014, and lobbied for tighter rules around lump-sum buyouts. He’s frustrated by what he calls the “general scandal” of Congress incentivizing companies to get out of their pension obligations — firs by allowing companies to present retirees with an option that isn’t as good as it looks, and then by increasing the incentive to do so by raising PBGC premiums.

“You’re taking a group of people who are retirees who are already living their lives on a pension, and you are saying to them, ‘here, instead of the pension, why don’t you take this big check,’ and they don’t bother to tell them that this big check is worth less than your pension,” Gotbaum said. “And that’s what Treasury said you can go back and do.”


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Old 03-25-2019, 09:23 PM
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https://burypensions.wordpress.com/2...r-2018-update/

Quote:
PBGC Primer – 2018 Update

Spoiler:
The update came out last week and in summary:

In FY2018, PBGC insured about 25,000 DB pension plans covering approximately 37 million people. PBGC became the trustee of 58 newly terminated single-employer pension plans and began providing financial assistance to an additional 6 multiemployer pension plans. PBGC paid benefits to 861,371participants in 4,919 single-employer pension plans and 62,300 participants in 78 multiemployer plans.

Last year’s primer had those numbers at:

24,000 DB pension plans covering approximately 40 million people….82 newly terminated single-employer pension….an additional 7 multiemployer pension plans….benefits to nearly 840,000 participants in 4,845 single-employer pension plans and more than 63,000 participants in 72 multiemployer plans.

So why the 4% increase in the number of Defined Benefit Plans but the 7.5% drop in participants?


My theory is that the big plans are ‘de-risking’ though annuity purchases or lump sum windows so as to get participant counts down and save on these extortionate PBGC premiums. However, to avoid 404(a)(7) limits on DB/DC combo plans small profitable companies who are subject to PBGC coverage by definition are adding Defined Benefit plans where the principals can maximize benefits under both types of plans. Very costly but if you are not a professional service company and it is only you and your son eligible then why not maximize and pay the $200 PBGC premium to get a $200,000 deduction?

More excerpts form the 2018 Primer:












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Old 03-31-2019, 10:41 AM
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ST. CLARE'S HOSPITAL

https://www.timesunion.com/business/...n-13717845.php

Quote:
St. Clare's Corp. seeks dissolution amid pension woes

Spoiler:
A corporation responsible for the troubled pension plan for former St. Clare's Hospital workers is seeking to end its legal existence.

Last fall, the corporation announced that 1,100 workers at the religiously affiliated hospital would get either no pension or a reduced check because the fund was short tens of millions of dollars. That left workers shocked and Albany Roman Catholic Diocese Bishop Edward Scharfenberger promising to find a way to help.

Late Tuesday, an email sent from the corporation's email account to local media outlets announced the corporation was "winding up its affairs" and had filed a petition in state Supreme Court to dissolve legally.

Attempts to reach corporation Chairman Joe Pofit for comment were unsuccessful. A reply to the email was not returned.

Since St. Clare's merger with Ellis Hospital in 2008, the corporation's only duty has been to oversee the workers' pension fund.

The email continued that the corporation had "completed the termination of the St. Clare's Hospital pension plan in February. The pension plan paid out approximately $30 million in benefits to St. Clare's retirees in the termination."

It added that "among its final acts, St. Clare's Corporation contributed $505,000 to the pension plan to be included in the final distribution to eligible plan participants. The corporation also donated its final remaining assets of $51,100 to Catholic Charities of the Diocese of Albany, to be used exclusively as a pensioner relief fund for the benefit of St. Clare's retirees."

Diocesean spokeswoman Mary DeTurris Poust said the bishop "was aware that the money would be given to Catholic Charities and placed in a 'restricted fund' solely for the benefit of pensioners."

She added, "As a board member, Bishop Scharfenberger was involved in the discussion related to the dissolution."

Previously, Pofit has said the fund would need at least $29 million to restore reduced pensions to more than 660 former workers who have lost all benefits.

That would bring pensions up to 70 percent of what had been promised, which is now what is being provided to 434 workers who had retired before November 2015. Pofit has said the pension fund would run out of cash entirely by 2024 if pensions were not slashed.

David Pratt, an Albany Law School labor law professor who is assisting the former St. Clare's workers, said the corporation "cannot walk away from any legal liability" for pension woes by dissolving its existence.

Pratt said efforts by the pensioners to get state assistance for the fund added to the proposed 2019-20 budget so far appear to be unsuccessful.

As part of the 2008 merger with Ellis, the St. Clare's pension fund got $28.5 million from the state. At the time, this amount was believed to be sufficient to support the fund for the lifetime of its remaining workers.

During the 1990s, officials at St. Clare's Hospital sought and received federal approval for a religious exemption for its pension, which up to that point was federally insured as a private plan. The hospital then got a $90,000 refund for its previous premiums, but the plan was then left uninsured from fiscal calamity.

The fund was also exempted from requirements that could have alerted former workers of potential financial underperformance.

Founded in Schenectady by Catholic priests and Franciscans in 1949, St. Clare's from its beginnings has been linked to the Albany Roman Catholic Diocese. Bishops also have served on the hospital board of directors.


https://dailygazette.com/article/201...ilout-stalling
Quote:
Efforts to obtain St. Clare's pension bailout stalling
Legislators say bailout won't be part of state budget as diocese is making no progress on funding

Spoiler:
ALBANY — With only a few days left before a new state fiscal year, it appears increasingly unlikely there will be any money in the state’s 2019-2020 budget to assist 1,100 former employees of St. Clare’s Hospital who saw their pensions reduced or eliminated.

Two state assemblymen who’ve been trying to broker a solution say the effort to obtain state money hasn’t been matched by any attempt to secure funding from a church-affiliated source.

Without that, they say, there is little likelihood of a state bailout for the pensioners of the defunct Schenectady hospital, which was closely connected to the Roman Catholic Diocese of Albany before, during and after its six decades of operation.

Nobody involved — legislators, diocese, pensioners — is giving up, but neither is anyone holding out hope for a near-term solution for those whose retirement income was suddenly reduced.

Assemblyman Phil Steck, D-Colonie, whose district includes the former St. Clare’s campus, said Tuesday: “I think if there’s going to be a fix it’s going to take some time. There’s no way you could get the pieces in place in this budget process.”

He said Albany Bishop Edward Scharfenberger and the diocese have expressed support for a funding solution but neither has shown any visible progress toward being part of one.

“The issue can’t be brought to the forefront, as we’ve explained, until we get a commitment from the Catholic Church.”

Lori Daviero of Amsterdam, a retired St. Clare’s X-ray technician, said the news was disappointing.

“It was another kick in the stomach, for sure,” she said. The diocese also hasn’t responded to inquiries about the followup meeting it said it would have with pensioners, she added.

“We are trying to do that,” Daviero said. “We want all the pensioners there. They limited it to just our committee last time.”

Assemblyman Angelo Santabarbera, D-Rotterdam, had long sought a meeting of pensioners, diocese officials and bipartisan legislators, and finally succeeded in brokering one in February. The strategy agreed on, he said afterward, was that legislators and the diocese each would seek part of the funding for a bailout of the pension fund.

The legislators followed through, but there’s been no progress reported by the diocese, he said Tuesday.

“It’s a little discouraging to see that,” Santabarbara said. “It makes it that much harder for us as legislators.”

As the March 31 budget deadline nears, he holds out some hope for an allocation of funds conditioned on other things happening first — not a bailout, but money set aside for a bailout, should the conditions become right for one.

“We have six days to go — that’s a lifetime up here at budget time.”

The diocese, using gradually more compassionate language in written statements, has denied responsibility for creating the pension fund crisis or for fixing it. Scharfenberger has declined direct comment and barred journalists from his two meetings with pensioners.

On Tuesday, the diocese released a statement that again identified no source of funding: “Bishop Scharfenberger continues to pursue all avenues with regard to possible funding to assist St. Clare’s retirees in some way. It’s an ongoing process.”

State Sen. James Tedisco, R-Glenville, whose district includes the old St. Clare’s campus, now part of Ellis Medicine, also has been trying to obtain relief for the pensioners. But unlike Santabarbara and Steck, he’s in the minority party in his house of the Legislature, and has little influence on budget allocations for a potential pension bailout.

He’s been seeking answers about what happened to the first state bailout of St. Clare’s Hospital pension fund — $28.5 million as part of the state-ordered closure in 2008 of the Schenectady hospital, which suffered chronic financial troubles as a safety-net hospital serving the uninsured and underinsured.

Tedisco’s request for an investigation was rejected by the state Comptroller’s Office on Feb. 14 and the state Attorney General’s Office on March 13.

Tedisco said Tuesday via email: “It’s becoming more and more remarkable and disconcerting that the highest-ranking statewide elected officials, governor, comptroller and attorney general, all who have investigative or subpoena powers as well as representing the 1,100 St. Clare’s Hospital workers whose pensions have been threatened, have refused to work together to find the cause of their pension insolvency or a way to move forward for pensioners.

“Why they are failing to intervene on behalf of these health care workers to find the cause(s) of the pension system failure is suspicious as to what they fear they may find and suggests a potential inconvenience of facts!”

Steck notes that the St. Clare’s pension fund was woefully underfunded — hospital management put no money into it in seven of the final 10 years and nearly no money the eighth year. (As a church-affiliated organization, the hospital used an exemption to opt out of the federal pension guaranty program that would have provided its retirees a safety net.)

The state, Steck said, was not obligated to bail out the fund in 2008, and the fact that the bailout money was invested and soon shrank in the Great Recession doesn’t obligate the state to do a second bailout now.

The Catholic Church or the diocese, he believes, needs to commit to a direct financial role in the bailout for the state to even consider providing more funds. One potential source of cash for the diocese, which has said it lacks the necessary funds itself, is the Mother Cabrini Health Foundation, a $3.2 billion philanthropic organization set up last year with the proceeds of the sale of Fidelis Care by the Catholic Church in New York.

“Assemblyman Santabarbara and I have a letter going to the Cabrini Foundation and we’ll see where that takes us,” Steck said.

Compounding the problem, Santabarbara said, is that the sum needed for a full bailout — to restore full pension payments promised to all 1,100 St. Clare’s pensioners — is apparently one-third more than initially thought: $56.5 million, rather than $42 million.

As a bailout is sought, efforts continue on another front: Legal Aid attorney Victoria Esposito is representing two of the retirees in an attempt to obtain relief. Any victory would apply only to those two, but could provide a precedent for the others, she has said.

She said on Tuesday that they had paused in hopes that litigation would not be necessary, but there has been little to no progress after the bishop met with pensioners in December, then met with pensioners and legislators in February.

“While we had hoped this could be resolved without litigation, we have continued to prepare for litigation throughout this period and will be ready to move forward in court should that become necessary,” Esposito said.

Meanwhile, the successor entity to St. Clare’s Hospital — St. Clare’s Corporation — issued a statement Tuesday indicating it had filed court papers seeking to dissolve.

Corporation President Joseph Pofit had said in February that this would be its next step — after overseeing termination of the pension plan, it had no reason to continue to exist.

Federal disclosure forms filed by St. Clare's Corp. showed a gradually diminishing cash reserve in recent years. In November, Pofit told The Daily Gazette the money came from historical reserves and a Medicare settlement, and was being used for ordinary fees and expenses. It was down to about $700,000 at that point, he said. Enough money would be set aside to fund corporate disolution, he said, and the remainder placed in the pension fund.

In one of its final acts, the corporation disposed of those remaining assets: $51,100 went to Catholic Charities of the Albany Diocese to be used to aid St. Clare’s pensioners and $505,000 went to the pension fund, which is administered by Prudential.

In an emailed statement Tuesday, it said: “St. Clare’s Corporation is aware of and supports community efforts to identify other sources of funding to help St. Clare’s retirees. If such funding is secured, it would be disbursed by another entity or entities.”
https://wnyt.com/news/st-clares-pension-fight/5294230/
Quote:
St. Clare's retirees exploring all options to fund pensions

Spoiler:
SCHENECTADY - Former employees of St. Clare's Hospital are considering their remaining options after learning the new state budget won't include money for people whose pensions were terminated.

NewsChannel 13 first brought this issue to light back in October 2018.

The retirees met with Bishop Edward Sharfenberger on December 20 to discuss the issue.

They met with both Bishop Scharfenberger and lawmakers on February 8, but they didn't come up with a solution.

This week, it was announced that there would be no money in the state budget to help.

To make matters worse, on Tuesday a petition was filed in Supreme Court in Schenectady County to dissolve the St. Clare's Corporation. The move comes as the group "has completed winding up its affairs."

The St. Clare's Corporation reportedly paid out about $30 million in benefits to over 1,100 pensioners when terminating the plan this past February.

The corporation then gave about another $500,000 to be distributed to eligible plan participants. The remaining $51,000 was donated to Catholic Charities of Albany. That money is to be used as a relief fund for St. Clare's retirees.

NewsChannel 13 spoke with Mary Hartshorn, a retiree and pension committee member Wednesday afternoon. She said she's remaining optimistic about the situation, but also understands it's extremely difficult to be patient at a time like this.

"That notice yesterday really hurt people hard you know," Hartshorn said. "You have to understand that these people are losing a great deal of money and that means mortgage, rent, health issues medical bills, whereas it's your medical bills. That's huge for people that live paycheck to paycheck and many of us did."

Fortunately, Hartshorn said they've been getting suggestions and advice from attorneys and other pensioners in similar situations.

Hartshorn said they'll look into fundraising efforts soon, as it's estimated an additional $56 million would be needed to make the 1,100 retirees' pensions whole again.

Hartshorn is still holding out hope that the money will come from the Mother Cabrini Fund.

The Albany Roman Catholic Diocese said it's an ongoing process and Bishop Scharfenberger is pursuing all avenues to find funding.

"The Cabrini Foundation -- I'm sure there are specific things that they want or need before they give the money out and I think he's exploring all of those," Hartshorn said. "I honestly do not think he's going to abandon us, I don't. I firmly believe he'll come through."

Though it's a last resort, attorneys advising the pensioners said they could have a case against the St. Clare's Corporation for designating the pension plans as "church plans." That allowed the corporation to avoid paying pension insurance premiums.

One attorney advising the group said it's a tricky game, because they'd like to see what happens with the Mother Cabrini Fund. However, the longer they wait, the longer some pensioners are without assistance.


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Old 03-31-2019, 11:24 AM
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DELPHI

http://www.tribtoday.com/news/local-...-pension-case/

Quote:
Delphi retirees lose pension case
Former workers deciding whether to appeal decision

Spoiler:
WARREN — A nearly 10-year pursuit by a group of Delphi salaried retirees to regain their full pensions is over — or at least it could be, if a ruling by a federal judge in Michigan isn’t appealed.

The latest document filed in the case, according to the court’s online docket, is a single-page judgment that states the case is closed.

It was filed Friday, the same day Judge Arthur J. Tarnow sided with the Pension Benefit Guaranty Corporation to dismiss the civil case filed in 2009 by the retirees group in an attempt to regain large portions of retiree pensions lost after Delphi declared bankruptcy, and the PBGC took over the pensions.

About 1,500 local salaried retirees were affected.

Tarnow determined the way PBGC came to be responsible for the pensions of the 20,000 or so Delphi salaried retirees and pension participants did not break any laws. He also ruled the group didn’t show PBGC’s taking over the plan was arbitrary or capricious.

“The record establishes that the salaried plan was severely underfunded for guaranteed benefits at the time of termination — approximately 50 percent underfunded,” the ruling states. “There was no entity willing to sponsor the salaried plan upon Delphi’s liquidation.

“In this case, PBGC and Delphi agreed to terminate the salaried plan because the plan failed to meet the minimum-funding standard required under the Internal Revenue Code and would be unable to pay benefits when due,” the ruling states. “In light of Delphi’s liquidation, PBGC faced the very real possibility of an unreasonable increase in long-run loss if the plan was not terminated.”

Chuck Cunningham, legal liaison for the Delphi Salaried Retirees Association, said a determination is pending on whether to appeal the decision to the U.S. Sixth Court of Appeals in Cincinnati. The group has 60 days to file the appeal.

“We have been basically in constant contact with attorneys since the decision was made … and we are going to make our decision soon here. We have two choices. One is to let it stand and the other is to appeal it,” Cunningham said.

Said Bruce Gump of Warren, chairman of the Warren Legislative Group and vice chairman of Delphi Salaried Retirees Association board of directors, “If you stop to think about it, from their own sworn testimony, the reason this happened to us, according to the president’s auto task force, is they felt we were too small and weak to fight back … so they just stood aside and let bad things happen to us.”

He said even though the task force’s authority came from the president and money from taxpayers, it could decide based on “commercial necessity” whether the group should be treated equally.

Delphi, formerly Packard Electric that at one time was part of General Motors’ parts division, filed for bankruptcy in October 2005 and emerged four years later. While Delphi was in bankruptcy protection in 2009, it relinquished responsibility for all its employee pensions to PBGC.

That move resulted in lower pension payments to retirees. General Motors continued contributing to union-represented retirees, but salaried retirees were left with substantially reduced pensions, some by as much as 70 percent. Those salaried retirees have argued the administration of former President Barack Obama ignored them while guiding GM through its own 2009 bankruptcy.

They also claim PBGC should have exercised its negotiating leverage with GM for the automaker to assume the salaried plan, but Tarnow wrote that was not a viable option.

“When offered the opportunity to assume the salaried plan, GM repeatedly, and emphatically, declined. In fact, no company offered to sponsor the salaried plan. Because funding the salaried plan could not continue without a sponsor, PBGC had no choice but to terminate,” the ruling states.


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