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  #901  
Old 05-26-2020, 12:04 PM
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Mary Pat Campbell
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https://www.forbes.com/sites/ebauer/...eamsters-plan/


Quote:
Multiemployer Pension Update: The Story Of The ‘Green Zone’ Teamsters Plan

Spoiler:
Back in March, I had the intention of writing a series on multiemployer pensions, and, in particular, bringing attention to pieces of the story that go beyond teamsters and miners, and I had a very helpful conversation with some experts at a different teamsters plan than the one that gets all the press, not Central States but the Western Conference of Teamsters Pension Plan. I wrote up a fairly extended article on the plan and some of the reasons why they had been so successful, then asked for clarification of some points — and, in that brief lag while the article sat in draft form, the stock market crashed, and it felt right neither to publish the article as if that crash had never happened, nor to solicit updated information while there was so much uncertainty.

But it’s time to continue on, which, ironically, means looking back.

As a reminder for readers, I am far from being a Washington insider. Clearly, Democratic attempts to push bailout legislation such as was tacked onto the HEROES Act, in which federal money is allocated to struggling plans with no benefit reductions, and with prior cuts restored, are not considered a viable path forward by Republicans, and the Republican Senate proposal in the fall was deemed to cut benefits, and raise employer contributions/premiums too harshly to be acceptable by Democrats. Whether there are legislators and staffers working behind the scenes to find the right solution, I don’t know, but the uncertainty of the corona-economy can’t justify allowing this issue to continue to drag on.

So who are the Western Conference of Teamsters? Let’s dig in.

The Western Conference plan is (or was, as of its most recent valuation at the beginning of 2019) 92.7% funded. Central States’ funded ratio? As of year-end 2018 (the most recent publicly available for that plan), 27%. The total participant count of the Western Conference plan, at about 600,000 members, is roughly 50% larger than Central States, placing them as the first and third-largest multiemployer pensions in the United States. (The National Electrical Benefit Fund sponsored by the International Brotherhood of Electrical Workers, with 550,000 participants, ranks second, and was 86% funded in 2018; the IAM National Pension Fund, for the International Association of Machinists and Aerospace Workers, ranks fourth with 280,000 participants and an 89% funding level.)


So how did these two plans end up with their very different funding levels? And what lessons are there to be learned from their story?

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Let’s start with the same sort of Schedule B government reporting-derived charts as I’ve produced for other plans (recall that these start in 1999, but that there are gaps in data availability depending on plan).

Here’s the funded status (based on the “funding” discount rate, and the reported assets and liabilities rather than the reported pension funded status which reflects certain adjustments) of those two plans:

PROMOTED


Western Conference vs. Central States Teamsters pension funds' funded status
Western Conference vs. Central States Teamsters pension funds' funded status OWN WORK
in which the contrast is evident.

But this is somewhat misleading: Central States has, reasonably enough, been shifting its investments into low-risk, low-return bonds, as is appropriate for a plan expected to be insolvent in 5 years. Here’s a comparison of the discount rates of the two plans:

Western Conference and Central States' interest rate comparison
Western Conference and Central States' interest rate comparison OWN WORK
(This is based on the reporting through the 2018 plan year, and excludes a drop in the WCT interest rate assumption implemented after this point.)

In other words, at least some part of the decline in funded status after 2015 is attributable to the apples-to-oranges element of the discount rate drop. Looked at on the basis of “current liability” (with a bond rate that’s the same across all plans) helps provide a better comparative sense:

Current liability funded ratio and discount rate
Current liability funded ratio and discount rate OWN WORK
And, finally, here’s the last of the charts that are becoming standard as I dig into these plans, the ratio of the active participants to the overall total for each of these plans:

Participant ratios, Western Conference and Central States
Participant ratios, Western Conference and Central States OWN WORK
At the beginning of this period, Central States and the Western Conference had ratios of active participants to total participants that were pretty comparable. Each of them declined, but the Central States’ decline was much more dramatic. Was this due to superior management on the part of Western Conference? It’s a facile explanation to draw this contrast, but, of course, the sharpest drop for Central States was due to the departure of UPS in 2007.

So what accounts for the diverging paths? I talked to Mike Sander, the Administrative Manager at at the plan. In his view and based on many years of experience, one of the keys to a well-funded plan is strong Trustee governance and an approach of, from the start, ensuring that the plan was managed in the best interest its worker-participants but likewise worked to keep the plan attractive for contributing employers; that is, with efforts aimed at both fiscal prudence as well as generosity of benefits, and this, he believes, has been the case from the plan’s beginning in 1955 when it was set up by employers and several local teamster unions covering 1,800 brewery workers in the Pacific Northwest.

Sander provided some further early history of the plan. At the time, the Teamsters’ structure included local unions, regional joint councils, and supraregional conferences, of which the Western Conference was one, covering 13 states. While “conferences” no longer exist, at the time, it provided an organizational structure which meant that, within the Western Conference, this plan became the pension plan for teamsters, in contrast to multiple smaller plans in other more balkanized regions. In addition, this structure meant that while Jimmy Hoffa was the General President of the Teamsters, nationally, he had little if any influence over the governance of the Western Conference of Teamsters pension.

In fact — to briefly go back into the history of pensions, generally speaking — for as much as the collapse of the underfunded Studebaker pension plan in 1963 provided the impetus for the ERISA funding legislation of 1974, not all pensions followed this same path. Consider how often you hear radio ads urging you not to buy annuities: in the days before 401(k)s and IRAs, deferred annuities offered a substantial benefit to purchasers, as they provided Roth-IRA-like tax advantages for retirement savings. And, in fact, while many pension plans in the pre-ERISA era were indifferent in their funding, others took a conservative approach, even to the point of buying deferred annuities for their employees, or, more generally speaking, using insurance companies, with a conservative investment approach, to manage their assets, insulating themselves (whether by happenstance or intention) from corruption in their investment decisions. Such was the case for the Western Conference, and only in the 1980s did they revise their trust agreement to allow for money management outside of insurance companies, and by that point the culture of sound management had been well-established.

With respect to benefits and funding, too, their structure was one that kept them on a track of long-term stability. In particular, the Trustees had established a formal funding policy in the mid-1980’s which governed action in periods of market gains and losses.

Readers may recall that in my profile of the Chicago Laborers’ Pension Fund, I explained a typical benefit formula for multiemployer plans as a fixed multiplier per year of work history, which is increased retroactively as plan finances permit and/or worker expectations demand. These retroactive increases are paid for over time, and can’t be clawed back except in extreme cases.

The Western Conference plan’s benefit formula is different; it provides an accrual percentage relative to contributions, for example, to take the current rate, the monthly pension benefit is calculated by summing up, for each year, the employer’s contributions made on their behalf multiplied by a contribution percentage. For example, for 2019, participants earned, as a monthly benefit at retirement, a benefit of 1.2% of the contributions made on their behalf that year. Conceptually, this is like buying a deferred annuity with a promise of a specific monthly benefit at the tail end — again, something that’s dreadfully old-fashioned in the US but still exists overseas, particularly in employer pensions in the Netherlands. It’s also similar to a “career average” pension plan in which benefits build up over time; the key is that the this formula provides greater flexibility than retroactive benefits, though still, of course, not as much as a fully-adjustable benefit would be.

In addition, as a further flexibility factor, for some years, the program provided an additional benefits level for participants with above 20 years of service — but, again, only service above this level is included, rather than boosting benefits all-at-once for all past years as well. (This accrual formula was eliminated in any case after the 2003 adjustments to the dot-com market crash.)

Of course, defining a benefit formula flexibly is only part of the story — and Central States’ pension has, among multiple different times of benefits for different classifications of participants, exactly this sort of benefit, according to the plan description on its website. But Central States had kept that benefit in place at a fixed contribution level from 1986 to 2003, and only dropped it down in 2004, in response to the dot-come bubble crash.

But that’s still not the whole story — at no point was the Central States’ benefit level (at least with respect to this one of their multiple benefit forms) greater than the Western Conference levels. According to Sander, another key part of their story has been plan trustee efforts in pursuit of transparency and trust-building of their employers and worker-participants, not only as the right thing to do for its own sake, but because this both keeps them from leaving the plan and encourages them to build up their contributions and boost the plan’s funded status. After all, the “contribution percentage” structure means that employees can boost their retirement benefits, even when the accrual rate has been cut, by shifting part of their compensation package and negotiating increased contributions in their collective bargaining agreements. And, even though the plan was, at the last valuation, 93% funded, only about half of the contributions into the plan go towards funding new accruals, and the remainder is used to reduce the underfunding levels. When participants have confidence in the plan, it creates a virtuous cycle of increasing contributions and new units joining.

And the Employer and Union Trustees have not simply relied on past practices to create that confidence. After the dot-com bust, those Trustees immediately engaged in conversations with advisors and actuaries, and were among the first plans to act to reduce future accruals in response to asset losses. In addition, the plan leadership met with every joint council in the West (that is, the regional entities), in roadshows with 300 - 400 members at a time, along with similar roadshows for employer-sponsors explaining the importance of the benefit cut and asking for patience and trust that they would manage the plan responsibly. Then, after having recovered the Plan’s funding levels and increased benefits in 2007 and 2008, the 2008 crash again dropped their funding levels and again the trustees acted quickly to drop benefit accruals without major participant/employer complaints because they had secured their goodwill (and continued with another round of roadshows).

So how did the Western Conference plan fare after the corona-crash? They have made public a letter sent to their contributing employers and teamster representatives. While they don’t provide a revised funded status, they write:

“Despite recent economic weakness, the Trust remains in excellent condition. Record employer contributions were received in 2019 and, for the first four months of 2020, contributions are up even more, increasing at an 8% annualized basis. The Trust’s diverse base of 1,412 employers in 85 industries provides protection from company-specific and industry weakness. Some of our key sectors, such as grocery, retail, waste disposal, and package delivery, are weathering the economic recession well. Some of our other industries are being affected more negatively, but the Trust’s 92.2% funding ratio provides a bulwark against possible future delinquencies. The Trustees are monitoring our contribution base closely and taking prudent steps to work with employers while also protecting the Trust.”


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  #902  
Old 06-03-2020, 10:38 AM
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Mary Pat Campbell
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Default

https://www.forbes.com/sites/ebauer/.../#68b7174167af

Quote:
Multiemployer Pension Update: The Story Of The ‘Green Zone’ Teamsters Plan
Spoiler:
Back in March, I had the intention of writing a series on multiemployer pensions, and, in particular, bringing attention to pieces of the story that go beyond teamsters and miners, and I had a very helpful conversation with some experts at a different teamsters plan than the one that gets all the press, not Central States but the Western Conference of Teamsters Pension Plan. I wrote up a fairly extended article on the plan and some of the reasons why they had been so successful, then asked for clarification of some points — and, in that brief lag while the article sat in draft form, the stock market crashed, and it felt right neither to publish the article as if that crash had never happened, nor to solicit updated information while there was so much uncertainty.

But it’s time to continue on, which, ironically, means looking back.

As a reminder for readers, I am far from being a Washington insider. Clearly, Democratic attempts to push bailout legislation such as was tacked onto the HEROES Act, in which federal money is allocated to struggling plans with no benefit reductions, and with prior cuts restored, are not considered a viable path forward by Republicans, and the Republican Senate proposal in the fall was deemed to cut benefits, and raise employer contributions/premiums too harshly to be acceptable by Democrats. Whether there are legislators and staffers working behind the scenes to find the right solution, I don’t know, but the uncertainty of the corona-economy can’t justify allowing this issue to continue to drag on.

So who are the Western Conference of Teamsters? Let’s dig in.

The Western Conference plan is (or was, as of its most recent valuation at the beginning of 2019) 92.7% funded. Central States’ funded ratio? As of year-end 2018 (the most recent publicly available for that plan), 27%. The total participant count of the Western Conference plan, at about 600,000 members, is roughly 50% larger than Central States, placing them as the first and third-largest multiemployer pensions in the United States. (The National Electrical Benefit Fund sponsored by the International Brotherhood of Electrical Workers, with 550,000 participants, ranks second, and was 86% funded in 2018; the IAM National Pension Fund, for the International Association of Machinists and Aerospace Workers, ranks fourth with 280,000 participants and an 89% funding level.)

So how did these two plans end up with their very different funding levels? And what lessons are there to be learned from their story?

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Let’s start with the same sort of Schedule B government reporting-derived charts as I’ve produced for other plans (recall that these start in 1999, but that there are gaps in data availability depending on plan).

Here’s the funded status (based on the “funding” discount rate, and the reported assets and liabilities rather than the reported pension funded status which reflects certain adjustments) of those two plans:

PROMOTED


Western Conference vs. Central States Teamsters pension funds' funded status
Western Conference vs. Central States Teamsters pension funds' funded status OWN WORK
in which the contrast is evident.

But this is somewhat misleading: Central States has, reasonably enough, been shifting its investments into low-risk, low-return bonds, as is appropriate for a plan expected to be insolvent in 5 years. Here’s a comparison of the discount rates of the two plans:

Western Conference and Central States' interest rate comparison
Western Conference and Central States' interest rate comparison OWN WORK
(This is based on the reporting through the 2018 plan year, and excludes a drop in the WCT interest rate assumption implemented after this point.)

In other words, at least some part of the decline in funded status after 2015 is attributable to the apples-to-oranges element of the discount rate drop. Looked at on the basis of “current liability” (with a bond rate that’s the same across all plans) helps provide a better comparative sense:

Current liability funded ratio and discount rate
Current liability funded ratio and discount rate OWN WORK
And, finally, here’s the last of the charts that are becoming standard as I dig into these plans, the ratio of the active participants to the overall total for each of these plans:

Participant ratios, Western Conference and Central States
Participant ratios, Western Conference and Central States OWN WORK
At the beginning of this period, Central States and the Western Conference had ratios of active participants to total participants that were pretty comparable. Each of them declined, but the Central States’ decline was much more dramatic. Was this due to superior management on the part of Western Conference? It’s a facile explanation to draw this contrast, but, of course, the sharpest drop for Central States was due to the departure of UPS in 2007.

So what accounts for the diverging paths? I talked to Mike Sander, the Administrative Manager at at the plan. In his view and based on many years of experience, one of the keys to a well-funded plan is strong Trustee governance and an approach of, from the start, ensuring that the plan was managed in the best interest its worker-participants but likewise worked to keep the plan attractive for contributing employers; that is, with efforts aimed at both fiscal prudence as well as generosity of benefits, and this, he believes, has been the case from the plan’s beginning in 1955 when it was set up by employers and several local teamster unions covering 1,800 brewery workers in the Pacific Northwest.

Sander provided some further early history of the plan. At the time, the Teamsters’ structure included local unions, regional joint councils, and supraregional conferences, of which the Western Conference was one, covering 13 states. While “conferences” no longer exist, at the time, it provided an organizational structure which meant that, within the Western Conference, this plan became the pension plan for teamsters, in contrast to multiple smaller plans in other more balkanized regions. In addition, this structure meant that while Jimmy Hoffa was the General President of the Teamsters, nationally, he had little if any influence over the governance of the Western Conference of Teamsters pension.

In fact — to briefly go back into the history of pensions, generally speaking — for as much as the collapse of the underfunded Studebaker pension plan in 1963 provided the impetus for the ERISA funding legislation of 1974, not all pensions followed this same path. Consider how often you hear radio ads urging you not to buy annuities: in the days before 401(k)s and IRAs, deferred annuities offered a substantial benefit to purchasers, as they provided Roth-IRA-like tax advantages for retirement savings. And, in fact, while many pension plans in the pre-ERISA era were indifferent in their funding, others took a conservative approach, even to the point of buying deferred annuities for their employees, or, more generally speaking, using insurance companies, with a conservative investment approach, to manage their assets, insulating themselves (whether by happenstance or intention) from corruption in their investment decisions. Such was the case for the Western Conference, and only in the 1980s did they revise their trust agreement to allow for money management outside of insurance companies, and by that point the culture of sound management had been well-established.

With respect to benefits and funding, too, their structure was one that kept them on a track of long-term stability. In particular, the Trustees had established a formal funding policy in the mid-1980’s which governed action in periods of market gains and losses.

Readers may recall that in my profile of the Chicago Laborers’ Pension Fund, I explained a typical benefit formula for multiemployer plans as a fixed multiplier per year of work history, which is increased retroactively as plan finances permit and/or worker expectations demand. These retroactive increases are paid for over time, and can’t be clawed back except in extreme cases.

The Western Conference plan’s benefit formula is different; it provides an accrual percentage relative to contributions, for example, to take the current rate, the monthly pension benefit is calculated by summing up, for each year, the employer’s contributions made on their behalf multiplied by a contribution percentage. For example, for 2019, participants earned, as a monthly benefit at retirement, a benefit of 1.2% of the contributions made on their behalf that year. Conceptually, this is like buying a deferred annuity with a promise of a specific monthly benefit at the tail end — again, something that’s dreadfully old-fashioned in the US but still exists overseas, particularly in employer pensions in the Netherlands. It’s also similar to a “career average” pension plan in which benefits build up over time; the key is that the this formula provides greater flexibility than retroactive benefits, though still, of course, not as much as a fully-adjustable benefit would be.

In addition, as a further flexibility factor, for some years, the program provided an additional benefits level for participants with above 20 years of service — but, again, only service above this level is included, rather than boosting benefits all-at-once for all past years as well. (This accrual formula was eliminated in any case after the 2003 adjustments to the dot-com market crash.)

Of course, defining a benefit formula flexibly is only part of the story — and Central States’ pension has, among multiple different times of benefits for different classifications of participants, exactly this sort of benefit, according to the plan description on its website. But Central States had kept that benefit in place at a fixed contribution level from 1986 to 2003, and only dropped it down in 2004, in response to the dot-come bubble crash.

But that’s still not the whole story — at no point was the Central States’ benefit level (at least with respect to this one of their multiple benefit forms) greater than the Western Conference levels. According to Sander, another key part of their story has been plan trustee efforts in pursuit of transparency and trust-building of their employers and worker-participants, not only as the right thing to do for its own sake, but because this both keeps them from leaving the plan and encourages them to build up their contributions and boost the plan’s funded status. After all, the “contribution percentage” structure means that employees can boost their retirement benefits, even when the accrual rate has been cut, by shifting part of their compensation package and negotiating increased contributions in their collective bargaining agreements. And, even though the plan was, at the last valuation, 93% funded, only about half of the contributions into the plan go towards funding new accruals, and the remainder is used to reduce the underfunding levels. When participants have confidence in the plan, it creates a virtuous cycle of increasing contributions and new units joining.

And the Employer and Union Trustees have not simply relied on past practices to create that confidence. After the dot-com bust, those Trustees immediately engaged in conversations with advisors and actuaries, and were among the first plans to act to reduce future accruals in response to asset losses. In addition, the plan leadership met with every joint council in the West (that is, the regional entities), in roadshows with 300 - 400 members at a time, along with similar roadshows for employer-sponsors explaining the importance of the benefit cut and asking for patience and trust that they would manage the plan responsibly. Then, after having recovered the Plan’s funding levels and increased benefits in 2007 and 2008, the 2008 crash again dropped their funding levels and again the trustees acted quickly to drop benefit accruals without major participant/employer complaints because they had secured their goodwill (and continued with another round of roadshows).

So how did the Western Conference plan fare after the corona-crash? They have made public a letter sent to their contributing employers and teamster representatives. While they don’t provide a revised funded status, they write:

“Despite recent economic weakness, the Trust remains in excellent condition. Record employer contributions were received in 2019 and, for the first four months of 2020, contributions are up even more, increasing at an 8% annualized basis. The Trust’s diverse base of 1,412 employers in 85 industries provides protection from company-specific and industry weakness. Some of our key sectors, such as grocery, retail, waste disposal, and package delivery, are weathering the economic recession well. Some of our other industries are being affected more negatively, but the Trust’s 92.2% funding ratio provides a bulwark against possible future delinquencies. The Trustees are monitoring our contribution base closely and taking prudent steps to work with employers while also protecting the Trust.”
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  #903  
Old 06-07-2020, 04:28 PM
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Mary Pat Campbell
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https://www.ai-cio.com/news/treasury...nion-pensions/
Quote:
Treasury OKs Benefits Cuts for Ohio, NY Union Pensions
Cincinnati roofer, Niagara Falls electrical worker plans are 16th and 17th funds affected.


Spoiler:
The Composition Roofers Local 42 Pension Plan of Cincinnati and the Teamsters IBEW Local Union No. 237 Pension Fund of Niagara Falls, New York, are the 16th and 17th pension funds to receive approval for a reduction in benefits by the Treasury Department under the Multiemployer Pension Reform Act of 2014 (MPRA).

The Cincinnati pension’s reduction plan calls for a flat 45% suspension for all participants, retirees, beneficiaries, and ex-spouses. Participants aged 80 and older will be fully protected, according to law, as would disabled participants, but those aged 75-79 would have reduced benefits.

The voting period for the reduction plan ran from Feb. 19 to March 13 and, of the 462 participants and beneficiaries eligible to vote who received ballots, 168 voted to reject the benefit reduction, while only 51 voted to approve it.

But because 243 did not return a ballot, that means a majority of voters did not vote to reject the benefit reduction, therefore the reduction is permitted to go into effect. The Treasury, in consultation with the Department of Labor (DOL) and the Pension Benefit Guaranty Corporation (PBGC), issued a final authorization to reduce benefits, which was effective April 1.

The plan’s actuary had projected that, without the benefits cuts, the plan would have become insolvent and unable to pay benefits by 2030. However, under the approved reduction plan, the fund is expected to remain solvent indefinitely, according to the actuary.

At the time the fund applied for the reduction, the trustees said they expected the suspension would remain in place permanently.

The approval for the Teamsters pension, which benefits electrical workers, came on its second application after it withdrew the first one in April 2019. The voting period ran from Feb. 19 to March 13, and, of the 399 eligible participants and beneficiaries who received ballots, 175 voted to approve the benefit reduction, 38 voted to reject it, and 186 did not return a ballot. Because a majority of voters did not vote to reject the plan, the benefit reduction is permitted to go into effect as of July 1.

The IBEW’s benefits reduction plan provides for different treatment for service earned before 2009 than for service earned after 2008. Although the new benefit formula is being applied the same across all participants and beneficiaries, the impact on each individual will vary.

For plan years 1976 through 2008, pension service credits will be limited to a maximum of 1.4 credits in a year. This is the same as the service limit that exists currently for plan years from 2009 and later, therefore all plan years from 1976 on will be treated with the same service limit.

The benefit multiplier for pension service credits earned up through 2008 is limited to $71 from the current benefit level of $85 per pension service credit.

Members who retired or had a break in service that resulted in a benefit multiplier of less than $71 will have their currently applicable multiplier remain in place. And the benefit multiplier for pension service credits earned in 2009 and later will be reduced to $76 from the current benefit level of $80 per service credit.

Participants who retired prior to the effective date of the suspension will have their benefit recalculated using the new service limit and benefit multipliers and using the same early retirement and optional form conversion factors that were applicable at their retirement date.

All other plan provisions, including eligibility and early retirement adjustments, would remain as in effect prior to the suspension of benefits.

The IBEW plan’s actuary had estimated that it would have run out of money to pay benefits by 2028 if the benefits reduction had not been approved.


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  #904  
Old 06-16-2020, 01:24 PM
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BAILOUT
TEAMSTERS
https://www.law360.com/benefits/articles/1281682

Quote:
$557M Pension Loss A Warning To Congress, Teamsters Say
Spoiler:
A new report indicating the Teamsters' pension fund lost $557 million in the first quarter of the year is yet another distress signal to Congress to protect retirees' pensions in the next coronavirus relief package, according to the self-described reform organization of the International Brotherhood of Teamsters.

The 385,000-member Central States Pension Fund is on track to become insolvent by 2025 as the number of active participants and employer contributions fall and the amount of benefits payouts skyrockets, according to its internal financial report released by the Teamsters for a Democratic Union on Tuesday.

According to the fund's March financial report, its assets dropped from $12.3 billion in December to $11.7 billion by March due only in part to the novel coronavirus, a stark contrast to the $76,614 increase from the same time last year.

The fund paid $711 million in benefits in the first quarter but took in only $156 million in employer contributions, with a total shortfall worth about $2 billion per year, the report said.

"These facts make it imperative that our union, locals, members and retirees work to win passage of federal legislation which protects the earned pensions of Teamsters and all workers," the TDU said in a statement. "This is especially true in this crisis period of a pandemic and a deepening recession."

The organization added its voice to growing calls for Congress to enact legislation through the next coronavirus relief package to protect against retirees losing their financial livelihood.

The Emergency Pension Plan Relief Act — which was included in the Heroes Act coronavirus relief bill that passed the House in May before stalling in the Senate — would allow struggling multiemployer pension plans to more easily transfer certain liabilities to the Pension Benefit Guaranty Corp. Still, the PBGC projects that its own multiemployer pension insurance program will become insolvent in 2025.

Senate Republicans, who have also been working on a proposal that would take similar action on multiemployer pension, should come to the table to negotiate a bipartisan solution, Central States said in a video encouraging its participants to push their members of Congress to support retirement security measures.

The TDU slammed the House's decision to add the so-called Grow Act to the Heroes Act, saying the legislation would allow for multiemployer plans known as "composite plans" that aren't subject to the PBGC's premium requirements or guarantees.

"It would only apply to plans that are well funded, including the Western Conference of Teamsters Fund," the TDU said. "The GROW Act, which was tacked onto the bill at the last minute ... should be taken out."
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  #905  
Old 06-19-2020, 10:20 AM
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Data on MEPs from the Congressional Research Service:
https://benefitslink.com/articles/CR...7-05222020.pdf
Quote:
Summary
Spoiler:

Multiemployer defined benefit (DB) pension plans are private-sector pensions sponsored by more
than one employer and maintained as part of a collective bargaining agreement. In DB pension
plans, participants receive a monthly benefit in retirement that is based on a formula. In
multiemployer DB pensions, the formula typically multiplies a dollar amount by the number of
years of service the employee has worked for any of the employers that participate in the DB
plan.
Some DB pension plans have sufficient resources from which to pay their promised benefits. But,
as a result of a variety of factors—such as changes in the unionized workforce and the 2007 to
2009 recession—many multiemployer DB plans are likely to become insolvent over the next 20
years and run out of funds from which to pay benefits owed to participants.
The Pension Benefit Guaranty Corporation (PBGC)—a federally chartered corporation—insures
the benefits of participants in private-sector DB pension plans up to a statutory maximum.
Although PBGC is projected to have sufficient resources to provide financial assistance to
smaller multiemployer DB plans through 2025, the projected insolvency of large multiemployer
DB pension plans would likely result in a substantial strain on PBGC’s multiemployer insurance
program. In its FY2018 Projections Report, PBGC indicated that the multiemployer insurance
program is highly likely to become insolvent by 2025. In the absence of increased financial
resources for PBGC, participants in insolvent multiemployer DB pension plans would likely see
sharp reductions in their pension benefits.
This report’s data are from the public use Form 5500 data for the 2017 plan year (the most recent
year for which complete information is available). Nearly all private-sector pension plans
(including multiemployer DB plans) are required to file Form 5500 with the Internal Revenue
Service (IRS), the Department of Labor (DOL), and PBGC. The Form 5500 information includes
breakdowns on the number of plan participants, financial information about the plan, and details
of companies providing services to the plan. Multiemployer DB plans specifically are required to
report their financial condition as being in one of several categories (referred to as the plan’s
“zone status”).
The insolvencies of these plans could affect the employers that contribute to multiemployer plans.
For example, an employer in a plan that becomes insolvent might have to recognize the total
amount of its future obligations to the plan on its financial statements, which could affect the
employer’s access to credit and, potentially, its participation in other multiemployer plans.
This report provides 2017 plan year data on multiemployer DB plans categorized in several ways.
First, the report categorizes the data based on plans’ zone status. Next, it provides a year-by-year
breakdown of the number of plans that are expected to become insolvent and the number of
participants in those plans. It then provides information on the 25 largest multiemployer DB plans
(each plan has at least 75,000 participants). Finally, the report provides data on those employers
whose plans indicate they contributed more than 5% of the plans’ total contributions (referred to
in this report as “5% contributors”). It lists (1) the 5% contributors whose total contributions to
multiemployer plans were at least $25 million and (2) the 5% contributors in the 12 largest
multiemployer plans (as ranked by total contributions to the plan) that are in the “critical and
declining”—the most poorly funded—zone status.
https://burypensions.wordpress.com/2...plan-primer-2/
Quote:
Multiemployer Defined Benefit Plan Data
Spoiler:
The Congressional Research Service (CRS) released Data on Multiemployer Defined Benefit (DB) Pension Plans.

Excerpts and some updated charts follow:


Multiemployer DB pensions are of current concern to Congress because approximately 10% to 15% of participants are in plans that may become insolvent. When a multiemployer pension plan becomes insolvent, the Pension Benefit Guaranty Corporation (PBGC) provides financial assistance to the plan so the plan can continue to pay benefits up to the PBGC guaranteed amount. Plans that receive PBGC financial assistance must reduce benefits to a statutory maximum benefit, currently equal to $12,870 per year for an individual with 30 years of service in the plan. Neither the guarantee amount nor benefits are adjusted for changes in the cost of living. (page 4)

Using 2013 data (the most recent year for which this data point is available), PBGC estimated that 79% of participants in multiemployer plans that were receiving financial assistance receive their full benefit (i.e., their benefits were below the PBGC maximum guarantee). Among participants in plans that were terminated and likely to need financial assistance in the future, 49% of participants have a benefit below the PBGC maximum guarantee, and 51% have a benefit larger than the PBGC maximum guarantee. Among ongoing plans (neither receiving PBGC financial assistance nor terminated and expected to receive financial assistance), the average benefit is almost twice as large as the average benefit in terminated plans. This suggests that a larger percentage of participants in plans that receive PBGC financial assistance in the future are likely to see benefit reductions as a result of the PBGC maximum guarantee level. (pages 4-5)

PBGC estimates that in the future it will not have sufficient resources from which to provide financial assistance for insolvent plans to pay benefits at the PBGC guarantee level. Most participants would receive less than $2,000 per year because PBGC would be able to provide annual financial assistance equal only to its annual premium revenue, which was $310 million in FY2019. There is no obligation on the part of the federal government to provide financial assistance to PBGC, although some policymakers have stated that some form of federal assistance to PBGC might be necessary to ensure that participants’ benefits are not reduced to a fraction of their promised benefits. (page 5)

In 2017, these 1,229 active plans not receiving PBGC financial assistance that filed Schedule MB had 10.4 million participants. Among participants in these plans about 36.3% were active participants (working and accruing benefits in a plan); about 35.7% were retired participants (currently receiving benefits from a plan) or beneficiaries of deceased participants who were receiving or are entitled to receive benefits; and about 28.0% were separated, vested participants (not accruing benefits from a plan, but owed benefits and will receive them at eligibility age). (page 6)

In 2017, these 1,229 plans had $494.5 billion in assets and owed participants $1,145 billion in benefits, resulting in total underfunding of $651.0 billion (on a current value [RPA ’94] basis). On an actuarial basis, these plans had $512.5 billion in assets and owed participants $659.2 billion, resulting in total underfunding of $146.7 billion. (page 7)


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Old 06-24-2020, 10:01 AM
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BENEFIT CUTS

https://burypensions.wordpress.com/2...-refile-again/
Quote:
Bricklayers 7 Refile (Again)
Spoiler:
Second three-time filer (Western States was the first) as the MPRA website showed that the Bricklayers and Allied Craftsmen Local No. 7 Pension Plan out of Austintown, OH (which was the sixth plan to file and then withdrew, refiled, withdrew) refiled again at at time when they might have $7 million left in the fund and negative cash flow of $2.5 million according to their latest 5500 filing:


Plan Name: Bricklayers and Allied Craftsmen Local 7 Pension
EIN/PN: 34-6666798/001
Total participants @ 4/30/19: 427 including:
Retirees: 223
Separated but entitled to benefits: 105
Still working: 99
Asset Value (Market) @ 5/1/18: 11,528,839
Value of liabilities using RPA rate (2.99%) @ 5/1/18: $65,312,402 including:
Retirees: $36,636,478
Separated but entitled to benefits: $16,085,173
Still working: $12,590,751

Funded ratio: 17.65%
Unfunded Liabilities as of 5/1/18: $53,783,563
Asset Value (Market) as of 4/30/19: $9,533,656
Contributions: $723,439
Payouts: $3,002,546
Expenses: $189,441
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Old 06-29-2020, 10:00 AM
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https://www.forbes.com/sites/ebauer/...-the-grow-act/


Quote:
Will A ‘Second Stimulus’ Bill Be A Second Chance For Multiemployer Pensions - And The GROW Act?

Spoiler:
Everyone’s talking about a “second stimulus,” it seems, these days.

Here’s CBS News:

“there are signs the White House may get behind additional stimulus funding, with the Wall Street Journal reporting that the administration is working on its own plan. During a press conference last week to discuss unemployment, President Donald Trump said his administration will be ‘asking for additional stimulus money,’ while his economic adviser Kevin Hassett told the Journal this week that the odds of another stimulus package ‘are very, very high.’

“On Thursday, Treasury Secretary Steven Mnuchin said the administration is ‘very seriously considering’ a second round of stimulus checks, according to The Wall Street Journal.”

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The remainder of that article, and the focus of reporting in general, is on the prospect of another round of “stimulus checks” — that is, whether and how much cash would be handed out directly to individual Americans, in the manner of the CARES Act’s $1,200. And, indeed, the HEROES Act, passed in the House in May, featured an additional $1,200 per person, with the elimination of some of the CARES Act’s restrictions — along with all manner of other spending, including an extension of the bonus $600 per week unemployment money and nearly a trillion dollars in money for state and local governments, totaling $3 trillion in new spending.

And “money grows on trees” proposals aren’t limited to Democrats, as witnessed by Arizona Republican Sen. Martha McSally’s proposal for the “American TRIP Act,” which would provide a tax credit for the cost of vacation spending, up to $4,000 per adult, $500 per child. Now, reassuringly, this proposal has been criticized in what appears to be a bipartisan fashion, but it’s a reminder of the risk that American taxpayers (of the present or future generations) face, whenever these sky’s-the-limit mammoth bills are assembled behind closed doors, of getting fleeced.

PROMOTED


All of which means it’s time to reiterate some key points with respect to multiemployer plans.

First, the Emergency Pension Plan Relief Act included in the HEROES Act is an unacceptable no-strings-attached, reform-free bailout of the system.

This legislation would provide bailout funds without limit. It would double the PBGC maximum benefit level, without any corresponding increase in contributions/premiums. It would not only provide this without the benefit cuts provided for in the Multiemployer Pension Reform Act (MPRA) of 2014, but it would restore the cuts that had been made to plans facing insolvency, in that process. And the reforms to funding regulations now under discussion are completely absent.

Second, there is a place for multiemployer legislation in such a future bill. As I’ve written before, experts on the subject have shared with me that, however far from a resolution the multiemployer pension crisis appears to be, there are bipartisan discussions underway, trying to make headway on the various sticking points, to find a solution with the right mix of bailout money, benefit cuts, contribution hikes, and tighter funding requirements, that is acceptable to all parties, that resolves the pending insolvencies for the most troubled plans while enabling others to stay financially healthy. Perhaps my contacts were indulging in too much wishful thinking; perhaps there is too much dysfunction in Congress for this sort of resolution to emerge. But it’s still vitally necessary for those who are working on this in good faith, to continue to do so, rather than throw up their hands and say, “it can’t be done.”

Yes, the Central States Pension Plan is not anticipated to become insolvent until 2025. (And, yes, this date is close enough, and the plan’s progression of contributions in and benefit payments out stable enough, and the plan’s expected investment income reliable enough — it’s largely in bonds — that this date is unlikely to change.) But that doesn’t mean that decisions can be deferred to that point — the longer the delay, the more costly the process will be; and lack of resolution in the meantime imperils those companies who are trying to do business amid the uncertainty.

Finally, the GROW Act is another crucial piece of the puzzle. Here, too, I’ll go back to the TRIP Act to draw a contrast. It might appear that the GROW Act’s appearance in the HEROES Act comes out of nowhere, that it was pulled together in the same “let’s see what we can get away with” manner as McSally’s TRIP Act. But that’s far from the case, as I explained back in May.

The GROW Act has been under development for multiple years. Though it first was introduced in January of 2018, its history goes back to the original 2014 MPRA legislation. Its designers at the National Coordinating Committee for Multiemployer Plans, working with a range of experts in the field, and looking overseas, for example, to the Netherlands, for successful examples of new plan types, put together a means of offering a hybrid, risk-sharing pension plan (they call it a “composite plan”) which, in my more optimistic moments, I truly believe offers a path forward not merely for multiemployer pension plans, but for all of us who want to have lifetime protection and risk-sharing even after the traditional employer pension plan has breathed its last breath: these plans would be required to target a 120% funding level (in practical terms, are required to be prudent in their calculations) and to follow a set of processes to improve funding level if they fail in this target.

It might appear that these “composite plans” (note to self: time to persuade their advocates to switch to a label of “risk-sharing” or “hybrid” plans!) are a bad deal compared to traditional defined benefit multiemployer plans: traditional plans promise no benefit cuts except for under extreme circumstances (or, if the HEROES Act were passed as-is, never) and fund without that extra 20% requirement. But that’s a very one-sided, narrow perspective. A “plan of the future” has to appeal to the “employer of the future” (or even — someday — “retirement savers of the future”) rather than relying on current employers being trapped into maintaining a plan regardless of required contribution levels. And if these plans establish a successful track record, it would surely open up possibilities for the vast majority of workers who are outside the traditional multiemployer pension system.

Which means, in that spirit, given that Congress loves its acronyms and initialisms almost as much as I despise them, I offer you, and them, a new legislation name: the REFORM Pensions Act, or

Re-

Envisioning

the Future

Of

Risk-sharing

and Multiemployer

Pensions

Act.

Who’s with me?


https://www.forbes.com/sites/ebauer/...M#71fda75b69c9
Quote:
Tell Congress: ‘Second Stimulus’ Bill Must Include Multiemployer GROW Act - For The Retirement Of The Future
Spoiler:

And the plan has a well-defined process for reducing benefits during periods of underfunding, from less to more severe (for example, taking away cost-of-living adjustments before directly cutting benefits), to protect both employers and workers from paying ever-rising contributions to fund past benefits.

(See my May article, “The HEROES Act/GROW Act’s Composite Pension Plan Design Is The Right Path Forward - So Why Do Unions Oppose It?”)

Not long ago, to understand why the GROW Act is the future of multiemployer pensions, I talked to an expert in multiemployer plans for building trades. He explained that certain large, established, so-called “international unions” are focused on preserving the status quo**, but that building trades’ unions are looking at expansion, persuading new contractors to sign agreements to use union labor, and existing multiemployer pensions are a real stumbling block, that contractors who would be willing to agree to all the other terms of the contract (wages, work rules, etc.) will not agree to become a participating employer in a multiemployer pension plan.

Why?

In part, joining a poorly-funded plan means a substantial portion of the pension contributions they pay don’t build their workers’ pensions at all, but only pay down debts for past accruals. But even aside from this, they face a significant risk that their contributions could rise dramatically in the future, and they’d be trapped in the plan due to very costly withdrawal requirements. It’s easy to look at large employers like GE or FedEx FDX and believe it’s only greed that leads corporate executives to end their workers’ pensions, but recall that even in a building-trades “green zone” pension plan I profiled a while back, contributions increased from $8 to $14 over a single decade, an increase of 75% — and to be clear, that means that, on top of cash wages, participating employers pay $14 per hour worked, into the pension fund. (And remember — this isn’t money that comes from a secret hoard somewhere, or is funded by wealthy CEOs forgoing another vacation house; this is, for the most part, funded by workers sacrificing pay raises.)

Would a new employer joining the plan on behalf of their employees in 2020 face a risk that their contributions would increase this much in the next decade? The GROW Act protects them, and sets the stage for new pension coverage for workers that would otherwise have none.

But what about the current pandemic and its market crash? Would composite plan participants see their benefits slashed in these cirumstances?

Not according to an analysis from early June which found that these plans would have done better than traditional plans. I’ll spare you the full details but cite a few sentences from the press release:

“A new study released today finds that composite retirement plans would have fared better during the coronavirus pandemic and related market declines than traditional defined-benefit multi-employer plans, allowing participants to receive higher benefits and attracting more employer participants. . . .

“The study found that while a multi-employer retirement plan that was certified in ‘critical and declining’ status suffered significant financial setbacks that are likely to result in the insolvency of the plan despite the recent implementation of a 15 percent benefit cut, a comparable composite plan would have performed more successfully. The participants in a similarly situated composite plan would have experienced a 5 percent reduction in benefits applied immediately after the 2008 crisis, which, in conjunction with the higher funding target, returned that plan to solvency. . . .

“The study also found that composite plans will achieve greater long-term employer participation than traditional pension plans. That is because the composite plans provide employers with the cost predictability they need to be successful in their businesses.”

Does this persuade you that the GROW Act would be good for union workers of the sort who are now a part of multiemployer plans?

That’s only part of the story. Not many of us are impacted by them, in that case, and it’s hard to get excited about that when there are so many other issues to draw our attention.

But the GROW Act is also the future of retirement for the rest of us.

How often have you heard worries that a future in which we all depend solely on a shaky Social Security system and on 401(k) or other retirement accounts, is one in which Americans are, in general, at risk of having insufficient income in retirement to maintain their preretirement standard of living or even meet their basic needs?

Yes, plan design changes over the years such as auto-enrollment and target date plans attempt to solve these problems. The SECURE Act is meant to make it easier to buy annuities — but annuities are still costly, because insurance companies must invest in low-return investments, that is, bonds rather than equities, and because only retirees in good health purchase them on their own. Were GROW Act-style plans to escape the narrow confines of the multiemployer pension world and become a mainstream type of pension plan for all kinds of workers at all sorts of employers, we would all benefit.

At the same time, I’m not aiming to set my readers to the task of persuading their representatives to open up GROW Act-style pensions to all comers. There is a clearly defined need for these plans within the multi-employer pension community. They have crafted this legislation and performed the analysis on how it would work within the general structure of multiemployer unions. It’s their baby. And, quite honestly, we need some guinea pigs, a means of getting these plans up-and-running as a starting point, so that we can learn from the experience and figure out exactly how they can be expanded further.

So who’s with me?

*Yes, I’ve tried to suggest various principles, such as the concept of implementing stricter funding rules for new benefit accruals and keeping existing rules for existing benefits, to avoid burdening plans which are well-funded according to those current rules. But that’s a bit of a tangent.

**Why do the “international unions” oppose this plan? There is indeed a provision that allows for slower progress towards full funding for the existing plan if a union switches to a “composite plan” for the future. In addition, these new plans don’t have PBGC protection against insolvency. Those objections are short-sighted, and, to the extent they’re based on misplaced confidence in getting the “whole loaf” from Congress, rather than half-a-loaf in terms of a bailout which would eliminate the need for cuts, misguided. But, again, a tangent.




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Old 07-05-2020, 03:42 PM
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Mary Pat Campbell
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https://www.scotusblog.com/case-file...anagement-inc/

Quote:
National Retirement Fund v. Metz Culinary Management Inc. Pending petition
Docket No. Op. Below Argument Opinion Vote Author Term
19-1336 2nd Cir. TBD TBD TBD TBD TBD

Disclosure: Goldstein & Russell, P.C., whose attorneys contribute to this blog in various capacities, is counsel on an amicus brief in support of the petitioners in this case.

Issue: Whether the Employee Retirement Income Security Act prohibits multiemployer pension plan actuaries from selecting actuarial assumptions to calculate withdrawal liability after the measurement date – the last day of the plan year immediately prior to the year in which an employer withdrew – even when such assumptions are based on their “best estimate of anticipated experience under the plan” and professional standards governing actuaries.


Spoiler:
SCOTUSblog Coverage
Petitions of the week (Andrew Hamm)
Date Proceedings and Orders (key to color coding)
May 29 2020 Petition for a writ of certiorari filed. (Response due July 6, 2020)
Jun 05 2020 Waiver of right of respondent Metz Culinary Management, Inc. to respond filed.
Jun 09 2020 DISTRIBUTED for Conference of 6/25/2020.
Jun 12 2020 Brief amicus curiae of Horizon Actuarial Services, LLC filed. (Distributed)
Jun 17 2020 Response Requested. (Due July 17, 2020)
Jul 01 2020 Motion to extend the time to file a response from July 17, 2020 to August 17, 2020, submitted to The Clerk.
Jul 02 2020 Motion to extend the time to file a response is granted and the time is extended to and including August 17, 2020.


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