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  #11  
Old 05-02-2013, 01:11 PM
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That's totally false. The whole point of assessing the withdrawal liability as companies downsize or leave is so that the last company that stays in the pool will not be stuck with the whole $25 billion debt.
My, my, you are trusting. The reality of MEP does not support your position. Those windfalls from past withdrawing employers did not bring the funding up enough. This negative Ponzi scheme does not work as you suggest. Part of the reason is that promised benefits are still underpriced and over-promised.
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Old 05-02-2013, 01:18 PM
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  #13  
Old 05-02-2013, 01:19 PM
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This is why I'm doing MEP watch, just like my public pensions watch thread.

There is a gap between stated goals of the laws/regs and what actually happens.

Also, more MEP stories were popping up in my pension news feed.
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  #14  
Old 05-02-2013, 02:01 PM
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My suggestion is that MEP funding would best be done in the manner of European funding schemes. Value all benefits such that market rate pricing applied to each new year's benefit (typically at interest rates below 3%).
Only allow past service increases (COLA for example) when fund exceeded 140% of liability. Well, Americans are more risk-takers, so maybe allow increase at 120% funding.
Then, when you achieve 8% returns, you can build up enough surplus to provide higher benefits. That would also make those union beneficiaries a lot more likely to cheer for stock market increases.
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  #15  
Old 05-02-2013, 05:53 PM
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My, my, you are trusting. The reality of MEP does not support your position. Those windfalls from past withdrawing employers did not bring the funding up enough. This negative Ponzi scheme does not work as you suggest. Part of the reason is that promised benefits are still underpriced and over-promised.
Still leaving something less than $25 billion for the last remaining employer I would think.
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  #16  
Old 05-02-2013, 07:22 PM
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Still leaving something less than $25 billion for the last remaining employer I would think.
Reasonable point, but the moral hazard for gaming the system with your timig of withdrawal is ever present.
Let's assume that I was the CFO of a participating employer. If I had that responsibility, I would try my best to keep that minimal participation until I closed the doors in bankruptcy especially if I could continue to use 7% interest rate funding as long as possible.
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  #17  
Old 05-10-2013, 05:44 PM
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http://www.thedailybeast.com/newswee...free-fall.html

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In 2010, the director of the Teamsters’ Central States pension fund, one of the most notorious problem funds, testified to Congress that “if no action is taken, the fund is projected to be insolvent in the next 10 to 15 years.” And while the stock market has recovered somewhat since then, the Pension Benefit Guaranty Corp. (PBGC), a government agency that insures pensions, considers the fund to be in “critical” status; it has less than 65 percent of the assets it will need to cover worker retirements.

Central States is responsible for the retirements of more than a quarter million workers. And it has a lot of company in its troubles; the Labor Department’s list of underfunded plans stretches to hundreds of names. A full quarter of the MEPs covered by federal pension insurance are listed as “critical,” while another 16 percent are “endangered.” Unless something is done, the pension agency’s fund dedicated to insuring MEPs is projected to run out of money by 2023.

In the face of this crisis, many companies are pushing to withdraw entirely from their funds, even at a high price: UPS gave Central States $6 billion to be released from the fund in 2008—which the fund promptly invested in a market that was about to crash. Even with a substantial withdrawal fee, companies estimate that they will certainly be better off (and the employees may be as well), because they won’t be on the hook if more companies in the fund go bankrupt. Arizona-based Republic Services Inc., which hauls trash across the United States, has been trying to follow in the footsteps of UPS, but faced a bruising fight with the Teamsters, even though Republic declared its willingness to pay more than $100 million to break free.
As of this writing, locals in Michigan have broken away to join a different Teamsters pension fund, and this week, Memphis just voted to move to a 401(k); the fate of other locals remains unclear.

Republic’s desire to pull out, even with a price tag of $100 million, seems entirely sensible. After all, they too relied on the promise that Central States would be able to pay out its pensions. Why should Republic end up footing the bill for other firms’ workers? But if Republic’s position seems sensible, so does the Teamsters’ trepidation. Their workers relied on the promises of a solid pension when they spent decades working at jobs that weren’t particularly pleasant, accepting those pension promises in lieu of higher pay. And as the example of UPS illustrates, every employer they allow out of their MEP fund puts the fund at greater risk of insolvency, even if those companies pay large sums to cover their share of the current unfunded liability. Why should they put worker retirement at risk to save Republic some money?


http://www.thedailybeast.com/article...r-pension.html

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But the big multi-employer plans (MEPs) run by the unions had an even worse problem. Pension contributions were set by multi-year collective bargaining agreements with each local. Those companies didn't have the option of stopping their contributions; to do so they'd have had to go back and negotiate a whole new contract with the unions (at the height of a labor market boom, to boot). So the money kept pouring into the pension funds even though they were already overfunded.

For obvious reasons, the pension funds didn't want to go to employers and explain why their contributions suddenly weren't tax deductible any more. But the IRS rules had them in a difficult place. The rules were very clear: if the fund was overfunded, you had to either stop making contributions, or increase the benefits. And the IRS refused to budge. So the pension plans increased the benefits.

The MEPs emerged from the dotcom crash not only with less funding than they should have had, but also burdened with a much richer set of benefits they had to pay out. Moreover, the 2001 recession had pushed a number of their member employers into bankruptcy. They left behind big unfunded liabilities--"orphan liabilities"--that by the rules of the plans, ended up spread around the remaining members. Suddenly, a big portion of everyone's hourly wage was going to make up for all those unaffordable promises, many of them made to the unemployed workers of bankrupt firms. Almost overnight, the union pension plan went, as one expert told me, from "an organizing tool, to a disorganizing tool". An open shop competitor that didn't have that big pension gap to fund could come along and woo your workers and customers by paying workers a higher wage, with good benefits and a 401(k), while still undercutting you on price. All because he didn't have to put $1 an hour towards the pension fund's unfunded liability.

This, of course, made the pension problems worse. That's why so many employers are trying to pull out; UPS paid Central States billions to exit in 2008. Naturally, Central States sensibly and responsibly put that money into the market, where it promptly lost half its value.

The government eventually fixed this problem, but only after the market had thoroughly finished crashing and destroying the funding status of these plans. Obviously, this was far too late to help anything. But better late than never, I suppose.

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  #18  
Old 07-05-2013, 05:33 PM
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http://www.pionline.com/article/2013...utm_medium=rss

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Teamsters, Central States, Southeast and Southwest Areas Pension Plan's funding has deteriorated to 53.9%, keeping it in “critical status,” according to its annual funding notice that covers the period through Dec. 31.

The Rosemont, Ill.-based pension plan's funding level fell from 58.9% in 2011 and 63.4% in 2010. Both the assets and liabilities of the plan have fallen over the same three years.

The pension fund's assets totaled $18.8 billion and liabilities, $34.9 billion, based on actuarial values as of Jan. 1, 2012, the latest plan measurement date. Plan assets fell from $21 billion in 2011 and $22.7 billion in 2010.

Plan liabilities fell during the same period from $35.6 billion and $35.9 billion, respectively.

On a market-value basis, plan assets totaled $17.7 billion as of Dec. 31. The notice had no corresponding liability data for that date.

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  #19  
Old 11-19-2013, 05:40 PM
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http://money.cnn.com/2013/11/15/reti...html?iid=HP_LN

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Hundreds of thousands of retired union workers are facing pension cuts that could slash their monthly payments in half — or even more.

The proposed cuts are part of a desperate effort to head off insolvency at multiemployer pension plans, pensions that typically provide benefits for workers at several companies.
....
The proposal would allow cuts for those plans that are closest to insolvency. According to the Pension Benefit Guaranty Corporation, which insures pension plans, up to 10% of the roughly 1,500 multiemployer plans will run out of money in coming decades.
.....
Nicodemus receives his checks from one of the country's largest multiemployer plans, the Central States Southeast and Southwest Area Pension Fund, which is also one of the most troubled. The fund is projected to become insolvent in the next 10 to 15 years. If cuts are allowed, the fund's more than 200,000 retirees could see their checks slashed by as much as 60%.
....
Official legislation is likely to be introduced in Congress in coming months. In the meantime, hundreds of thousands of retirees are left unsure whether their pension benefits are safe.
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  #20  
Old 11-20-2013, 09:55 AM
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Hundreds of thousands of retirees are left unsure whether their pension benefits are safe.
Let me remove their uncertainty. They're not safe. Their only choice is between a haircut starting soon or getting nothing a few years down the road.
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