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  #871  
Old 02-10-2020, 05:11 AM
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Mary Pat Campbell
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https://burypensions.wordpress.com/2...ition-roofers/

Quote:
Breaking News: Benefit Cuts for Composition Roofers
Spoiler:
Appearing today on the MPRA website is the approval letter to cut benefits for participants in the Composition Roofers Local 42 Pension Plan out of Cincinnati, OH.

From their latest 5500:


Plan Name: Composition Roofers Local 42 Pension Plan
EIN/PN: 31-6127285/001
Total participants @ 12/31/17: 488 including:
Retirees: 239
Separated but entitled to benefits: 74
Still working: 175

Asset Value (Market) @ 1/1/18: $26,053,645
Value of liabilities using RPA rate (2.98%) @ 1/1/18: $79,060,791 including:
Retirees: $52,164,415
Separated but entitled to benefits: $9,951,709
Still working: $16,944,667

Funded ratio: 32.95%
Unfunded Liabilities as of 1/1/18: $53,007,146

Asset Value (Market) as of 12/31/18: $22,362,057
Contributions: $1,133,418
Payouts: $3,449,227
Expenses: $244,571


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  #872  
Old 02-11-2020, 10:09 AM
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https://www.napa-net.org/news-info/d...irement-policy

Quote:
Trump’s FY 2021 Budget is Light on Retirement Policy
Spoiler:
For the second year in a row, President Trump’s fiscal year budget doesn’t cover much new ground on the retirement policy front.

Released by the White House’s Office of Management and Budget on Feb. 10, the President’s budget proposal, “A Budget for America’s Future,” calls for $4.8 trillion in outlays for fiscal year 2021, which begins Oct. 1, 2020. It also seeks more than $5 trillion in spending cuts over the period 2021-2030, but most, if not all, of that will likely be rejected in the House, where Democrats control the chamber.

PBGC Premiums and Multiemployer Solvency

In the retirement policy space, most of the budget details relate primarily to the Pension Benefit Guaranty Corporation (PBGC), the nation’s private pension insurer, and multiemployer solvency issues.

The budget estimates that the PBGC’s multi*employer plan (not to be confused with multiple employer plans, or MEPs) program, which insures the pension benefits of 10 million workers, is in “dire financial condition.” It notes that the program’s 2019 deficit was $65 billion, with only $2.9 billion in assets and $68 billion in liabilities. Accordingly, the PBGC projects the multiemployer program will be insolvent by the end of 2025, at which point participants in insolvent plans would see their guaranteed benefits cut by as much as 90%.

To alleviate this, the proposal calls for a new variable rate premium (VRP) based on plan underfunding, as exists in the single-employer program. In addition, the budget proposes an exit premium – equal to 10 times the variable-rate premium cap – to be assessed on employers that withdraw from a multiemployer plan to compensate the multiemployer program for the additional risk imposed on it when employers exit.

The budget shows that these proposals are estimated to raise an additional $26 billion in premium revenue over the period 2021-2030. The administration contends that PBGC premiums are currently far lower than what a private financial institution would charge for insuring the same risk, and at this level of premium receipts, the program is projected to remain solvent over the next 20 years.

In contrast, the budget proposal notes that the PBGC’s single-employer program reached a modest positive net position in 2019 for the second year in a row. As such, the budget proposes to freeze for three years premium rates for many single-employer plans and adjust the variable-rate premium cap to restore the incentive for employers to improve funding of promised pensions.

Other Changes

The FY 2021 budget further proposes a permanent extension of the individual income, estate and gift tax provisions of the 2017 Tax Cuts and Jobs Act, which are currently set to expire Dec. 31, 2025.

The budget proposal also includes clarifications in worker classification and information reporting requirements. It also would give Medicare beneficiaries with high-deductible health plans the option to make tax deductible contributions to health savings accounts or medical savings accounts.

Submittal of the president’s budget is generally considered the opening salvo in the annual budget policy debates between Congress and the president. Since this is an election year, it’s safe to assume that much of these debates will center around “messaging,” rather than actual policymaking.


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  #873  
Old 02-19-2020, 02:30 PM
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https://www.forbes.com/sites/ebauer/.../#3108d5592779

Quote:
What Went Right With The Chicago Laborers’ Fund? Another Multiemployer Pension Case Study
Spoiler:
“State and local pensions are dangerously underfunded!”

“Multiemployer plans are nearly insolvent!”

“The birth rate is dropping and there will be no one to support us in our dotage!”

Am I starting to sound like a broken record?

Time for some good news, for a change, or, rather, a bit of a case study with a multiemployer plan that is not headed toward insolvency, and is in fact in the “green zone” that designates healthy plans. The plan in question is the Chicago Laborers’ Pension Plan, which provides retirement benefits for workers in the building and construction trades in the greater Chicago area: road builders, masons, plasterers, and others represented by unions which fall under the general heading of “laborers.” The plan has nearly 29,000 participants, of which 12,000 are active employees, and fits within the classic purpose of a Taft-Hartley multiemployer plan, providing one single unified pension benefit for workers who might have had a variety of employers in their working lifetime. (All the information that follows comes from the plan’s website as well as the Form 5500 Schedule B reporting for the plan, available from 2000 - 2017, except for the years 2008 and 2010.)

Let’s start with some basics.

Today In: Money
Here’s the plan’s funded status, as reported on the website beginning with the 2010 plan year up to the present.

Laborers' funded status
Laborers' funded status OWN WORK
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Is that a bit unfair? The small intervals make it look like there’s a lot of fluctuation. How about this one?

Laborer's funded status
Laborer's funded status OWN WORK
And yet that’s not quite right. You’ll note I’ve labelled this “reported funded status” — it’s a quirk of the funding rules that is not simply the assets divided by liabilities at valuation date, but that contributions scheduled to be made in the coming year but designated for the prior year are “counted” as part of the assets. So here’s a chart of the plan’s funded status calculated in a more straightforward manner, based on the government reporting, which stretches back further but misses the most recent years. The funding level had a clear decline from a previously higher level and is now below 80% instead of just above, but has been steady since the post-recession market recovery.

Funding levels over time
Funding levels over time OWN WORK
For what it’s worth, I’ve also included a comparison to the Teamsters here, since I looked at their situation at length in the past.

And here’s one more funding level chart:

Current liability funding ratio
Current liability funding ratio OWN WORK
The “Current Liability” measure is based on a corporate bond rate, rather than a valuation interest rate that matches the expected return on plan assets. In the case of the Laborers’, the plan has used 7.5% for the latter rate for the entirety of this time frame. The corporate bond rate, however, has dropped considerably, even though, due to “funding relief” provisions, it is higher than the actual bond rate would dictate. Here’s a chart showing both the funded status and the applicable discount rate over time:

Current liability funding ratio and rate
Current liability funding ratio and rate OWN WORK
So what does all this mean?

There are a couple fundamental questions which apply to all multiemployer plans, not just the ones facing insolvency:

What funded status target is necessary in order to avoid insolvency in the future?

and

What is the appropriate discount rate to measure liabilities, to protect against insolvency?

These are not easy questions, and this is, in part, what’s stymieing the efforts to put together a workable consensus on multiemployer pension rescue and reform.

In particular, the funded status charts above clearly illustrate the impact of a tighter discount rate regulation - the funded status drops from 75% to 40%, and contribution requirements would escalate sharply.

Here’s another issue:

The Teamsters and the mine workers found themselves in such dire straits because the ratio of active workers to total participants shrunk so drastically so that there simply weren’t enough participants (or participating employers) to make up the funding deficit.

Here’s how that looks for the Laborers’:

Active employees as a percent of total
Active employees as a percent of total OWN WORK
The ratio for the Teamsters dropped dramatically during this timeframe, and especially during 2007, when UPS left the plan. The Laborers’ plan looked fairly stable — until it wasn’t any longer, with a substantial drop-off from ratios in the low 60s, to not much more than 40%. (The blanks are due to years with missing data in the online reporting.)

What happened?

The recession happened — at least, it appears reasonable to surmise this is the cause.

And as a result, the relative levels of contributions, benefit accruals, and benefit payouts shifted after the recession:

Laborers' plan cashflows
Laborers' plan cashflows OWN WORK
To keep the plan funding levels in line, even with fewer active employees, employer contribution levels increased significantly. The above chart shows total contributions; below is the hourly contribution rate (that is, a per capita equivalent, because employer pay into the fund on behalf of and in direct proportion to their active workers).

hourly contribution rate
hourly contribution rate OWN WORK
But here’s another characteristic of multiemployer plans to fit into this context: in a typical single-employer plan, the benefit formula is based on a worker’s pay at retirement; in a multi-employer plan (and in union plans generally), it’s more often based on a fixed multiplier per year of work history, which is increased on a regular basis in the same way as pay scales are increased.

Here’s the contribution schedule, according to the plan document at the plan’s website:

Benefit multipliers
Benefit multipliers OWN WORK
Not only is the multiplier negotiated in each successive collective bargaining agreement, but the additional liability added to the plan with each increase — because each increase is retroactive — is “paid for” by future contributions; there is no provision to determine liability based on anticipated future increases at a given rate (as is done with accounting requirements, for explicitly salary-based plans, when salary is projected to retirement based on anticipated increases), nor a requirement to only increase the multiplier when the plan is so well-funded that the increase can be “paid for” out of its overfunding.

The 1980s saw significant increases in the multiplier — a total increase of 150% over this time frame. Online government reporting doesn’t date this far back to enable us to understand whether this, and the more moderate but still above-inflation increases in subsequent years, were at a time of high funding levels, or whether there is other relevant context. But from 2008 to 2019, despite the significant increase in employer contributions, participants saw no increase in benefit levels. And even now, one could make a case that the 2019 increases were not appropriate, that the plan should have waited until funding levels were more solid, at the full funding level rather than just barely exceeding the 80% threshold that defines a “green zone” plan — but it’s easy to see active plan participants complaining that contribution levels had grown so much without seeing any benefit, and complaining that they’d waited long enough to resume the regular benefit increases.

When it comes down to it, there aren’t any easy answers. Can the Laborers’ fund be confident that, now that the recession is over, they are at a “new normal” or will even, surely soon enough when the Chicago housing market finally picks up, can more active participants to balance out the retirees? Or does holding such a belief put them at risk of facing troubles in the future, difficulties they would be hard-pressed to rectify once they occur? Should they put their efforts into reaching 100% funding, for more security, or trust that their 80%/”green zone” status offers them the security they need? How much greater risk are they at due to their 7.5% investment return assumption, and the prospect of losses each year the plan earns less than this level? For that matter, even though the contributions are paid by employers, it’s generally recognized that the workers are sacrificing salary they would have otherwise been paid, and in the time since the recession, to keep the funded status level, the foregone-pay contributions have risen by over $5.00. There’s nothing fundamentally wrong with that, if they have a strong ethos of intergenerational sharing as a part of “union brotherhood,” but is that the case, or have they resented their (employers’) contributions climbing this past decade solely to avoid shortfalls due to generous increases in the past and that shift in active-to-retiree ratio?

And as a reminder, this plan was chosen somewhat at random, but is fairly typical of multiemployer plans in many ways, especially in that (using 2018 data) two-thirds of plans were more than 80% funded on a “funding” basis, accounting for 63% of participants in the overall system. Forty-four percent were actually over 90% funded (35% of participants), and 22% (8% of participants), over 100% funded. There are two challenges facing the multiemployer system, because, beyond rescuing those plans about to collapse into insolvency, Congress must ensure that new legislation keeps these plans healthy in the long term.


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  #874  
Old 02-19-2020, 02:40 PM
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Mary Pat Campbell
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BAILOUT

https://billingsgazette.com/opinion/...44fe9739c.html
Quote:
Prairie County Commissioner Teske wrong about pension law

Spoiler:
Prairie County Commissioner Dennis Teske’s response to James Holbrook’s letter to the editor in support of the Butch Lewis Act of 2019 claimed that The Declaration of Independence, The Constitution, and the Bill of Rights do not provide the right to retire with dignity. This an extraordinary display of hypocrisy coming from Commissioner Teske.

Teske argues against the Butch Lewis Act, which provides support to union pension plans at risk of insolvency, by waxing poetically about personal responsibility and the unending threat of servitude to our government. He makes these claims while failing to disclose the $271,474 he took in farm subsidies between 1995 and 2004. I must have missed the part of the Constitution that says farmers have a right to federal subsidies.

The Butch Lewis Act of 2019 protects pensions from insolvency and counteracts pension fund managers ignoring their fiduciary responsibilities. It allows for the workers like Teamsters and electricians who provide the vital services that make our economy go to have peace of mind when they walk off the job for good.

The inalienable rights our forefathers laid out were life, liberty and the pursuit of happiness. The Butch Lewis Act of 2019 provides all three.

Stick to something you know, Commissioner Teske, like accepting federal subsidies.

Chris Sanderson

IBEW 206 vice president

Billings


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  #875  
Old 02-20-2020, 05:24 PM
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https://www.ai-cio.com/news/trump-wa...paign=CIOAlert

Quote:
Trump Wants $26 Billion Premium Hike for PBGC Multiemployer Plan
White House wants new variable-rate premium, saying that would help stave off insolvency for 20 years.


Spoiler:
President Donald Trump’s 2021 federal budget proposes raising approximately $26 billion in new premiums for the Pension Benefit Guaranty Corporation’s (PBGC) multiemployer program over the next 10 years, which it says will help the program remain solvent over the next 20 years.

The PBGC’s multiemployer program insures the pension benefits of approximately 10 million workers and, according to the agency’s own projections, the program is in “dire financial condition” and is expected become insolvent by the end of fiscal year 2025.

“PBGC premiums are currently far lower than what a private financial institution would charge for insuring the same risk,” the budget states. “The proposed premium reforms would improve PBGC’s financial condition and are expected to be sufficient to fund the multiemployer program for the next 20 years.”

The budget notes that the multiemployer program’s deficit for 2019 was $65.2 billion, with only $2.9 billion in assets and $68 billion in liabilities, adding that pension plans would see their guaranteed benefits cut by as much as 90% if the PBGC becomes insolvent. It also said the multiemployer premiums are currently “very low” at a flat rate of just $30 per participant in 2020.

To stave off insolvency, and better align multiemployer premiums with the risk PBGC is insuring, the budget has proposed the creation of a variable-rate premium (VRP) based on plan underfunding, as is the case with the PBGC’s single-employer program. This would include an exit premium assessed on employers that withdraw from a plan to compensate for the additional risk imposed on the PBGC.

However, an increase in premiums may not be palpable for many of the companies in the multiemployer programs, said Mike Moran, managing director of Goldman Sachs Asset Management. Moran said that because these plans are typically grouped on an industry basis, the ones in struggling industries, such as retail or trucking, may not be on the strongest financial footing and could have difficulty paying more in premiums.

“I think it’s a tricky problem on the multiemployer side because they need more money to plug that deficit in the PBGC system,” Moran told CIO. “On the other hand, a lot of those companies that are participating in multiemployer plans are ones that may potentially be in financial distress.”

Moran pointed out that increased premiums have led many companies in the single-employer program to increase the funded levels of their plans or opt for risk-transfer strategies, such as moving participants into an annuity. However, that’s not as easy with multiemployer plans because they have to act collectively.

“A variable-rate premium definitely does provide an incentive to provide more funding into the plan to get out from under the premium,” Moran said, “but the question becomes where is that money going to come from?”

Moran also said a spike in premiums could lead companies to move away from these plans to reduce their exposure. “They could say we’re not going to participate in these plans, we’d rather hire workers that aren’t covered by a multiemployer plan, that way we’re not paying into them.”

Meanwhile, the PBGC’s single-employer program is in far better financial condition than the multiemployer program, even reaching a “modest positive net position” for the second year in a row, according to the budget. Because of this, the proposed budget would freeze premium rates for many single-employer pension plans for three years and adjust the variable-rate premium cap to restore the incentive for employers to improve funding of promised pensions.


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  #876  
Old 02-21-2020, 05:21 PM
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BENEFIT CUTS

https://www.ai-cio.com/news/nyc-team...paign=CIOAlert

Quote:
NYC Teamsters Pension Reapplies for Benefits Cuts
Local 807 Labor-Management Pension Fund participants could see average benefit reduction of 21%.

Spoiler:
The Teamsters Local 807 Labor-Management Pension Fund of Long Island City, New York, has reapplied for a reduction in pension benefits with the US Treasury Department after having to withdraw its first application a year ago when the federal government shutdown complicated matters.

The trustees of the fund submitted the first application for relief under the Multiemployer Pension Reform Act of 2014 (MPRA) in June 2018 with a proposed pension preservation plan. However, the trustees said, while they were providing additional information to support the application, the federal government shutdown in late 2018 and early 2019 closed the Treasury Department, and the procedures for providing supplemental information to the Treasury and Pension Benefit Guaranty Corporation (PBGC) staff were halted.

Because of the snafu, the Treasury Department advised the trustees to withdraw the application with the understanding that it would otherwise be denied.

The trustees submitted a new application on Dec. 30, 2019, with a new pension preservation plan, which the trustees said takes into account the issues raised by the Treasury Department in the first application, though the trustees did not specify what those issues were.

“We believe that the new preservation plan is fair and reasonable and that the Treasury Department has good reason to approve it,” the trustees said in a letter to the pension’s participants.

Under the pension preservation plan, the monthly pension benefit payments of any pensioner who is in pay status as of Nov. 1, 2020, would be reduced by up to 49% as of that date, and the monthly pension benefit payments of any participant or beneficiary who enters into pay status after Nov. 1, 2020, would be reduced by up to 49% for benefits earned through Oct. 31, 2020. Additional benefits earned after Nov. 1, 2020, would not be reduced.

The monthly pension benefit payments of any individual would not be reduced below 110% of the monthly pension benefit, which is guaranteed by the PBGC. And for retirees who are 75 or older as of Nov. 1, the payment reduction may not exceed the “applicable percentage” of the portion of the monthly pension benefit payments that would be reduced. The “applicable percentage” is a percentage of the number of months occurring in the period that begins with the month after Nov. 1, and that ends with the month during which the retiree reaches the age of 80.

The effective date of the proposed suspension plan is Nov. 1, and the trustees estimate that the average benefit suspension will be 21%. There would be no reduction for any participant who is receiving a disability pension, or who is in pay status as of Nov. 1, 2020, and has reached age 80 by Nov. 1, 2020.

The trustees warned that if they don’t act now, the fund will run out of money in 10 years or less, and they would be forced to rely on benefits from the PBGC, which itself is expected to run out of money by 2025. They attributed the financial difficulties to a combination of external factors, such as stock market crashes, misguided government regulations, employers who have left the plan or have gone out of business, and an “unsustainable ratio” of 5.42 retirees to every one active participant.

“Reducing pensions for current retirees and beneficiaries is not something we want to do. But it’s the only way that we can prevent the pension fund from going broke,” the trustees told its participants. “If the pension preservation plan works as we expect it to, the result will be a pension fund you can count on for many years to come.”


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  #877  
Old 02-28-2020, 09:44 AM
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https://www.ai-cio.com/news/multiemp...paign=CIOAlert

Quote:
Multiemployer Pension Funding Reaches Pre-Financial Crisis Levels
Double-digit asset gains boost aggregate funded ratio to 85% in 2019.

Spoiler:
Thanks to double-digit asset returns, the aggregate funded percentage of US multiemployer pension plans increased to 85% in 2019, up from 74% in 2018, and returning to pre-financial crisis levels of 2007, according to actuarial and consulting firm Milliman.

Milliman also reported that there is now a larger percentage of plans over 100% funded compared with 2007; however, struggling multiemployer pensions have not participated in the rebound due to plummeting discount rates as 104 plans are now below 50% funded, compared with just 28 in 2007.

Over the past decade, the weighted average discount rate has dropped approximately 50 basis points, and the aggregate funded percentage of the 130 plans in critical and declining status has been cut in half to 37% at the end of 2019 from 74% at the end of 2007.

“While about 130 plans continue on a path toward insolvency, the majority of non-critical plans have improved since 2007 and are at higher funding levels today,” Nina Lantz, a principal and consulting actuary at Milliman, said in a statement. “In addition to investment performance, many plans are seeing funding levels increase due to benefit and/or contribution adjustments made during the past decade.”

Milliman reported that the overall funding shortfall for all plans declined by approximately $69 billion to a total of $107 billion during 2019. The improvement of the aggregate funded percentage to 85% from 74% was attributed primarily to asset returns in 2019 exceeding expectations.

According to Milliman’s December 2019 Multiemployer Pension Funding Study, many plans are also improving because of benefit and contributions adjustments made over the years, and are currently using excess contribution income over operating costs to pay down their shortfalls.

However, despite these changes, it said that many plans continue to operate with negative cash flow as benefit payments plus expenses exceed contributions and therefore remain vulnerable to investment volatility. Milliman said plans that have already reduced benefits and/or increased contributions may not be able to weather another market downturn because there is less room for additional adjustments.

Actuarial consulting firm Cheiron reported in December that as many as 117 multiemployer pension plans covering 1.4 million participants are underfunded by $56.5 billion, and could become insolvent within the next 20 years. And to make matters worse, the Pension Benefit Guaranty Corporation (PBGC), the government lifeboat for struggling pensions, has reported that its multiemployer program is likely to become insolvent within five years.

“The 2008 market shock exposed the growing maturity of many multiemployer plans,” the Milliman study said. “Over the past 12 years, the plans that have been able to make the adjustments necessary to improve funding have separated themselves from the plans that could not, resulting in a wider disparity of plans.”

As a result, the rich have gotten richer while the poor have become poorer as the gap between the non-critical plans and critical and declining plans continues to widen. Although the aggregate funded percentage of the multiemployer plans is now the same as it was in 2007, the percentage of plans above 100% funded has increased to 39% from 26% while the percentage of plans below 50% funded has quadrupled to 8% from 2%.

“Non-critical plans have largely recovered from the global financial crisis,” the study said. “Critical plans are not quite back to the funding level they were at prior to the 2008 crash, and prospects for recovery remain tenuous.” Milliman said that part of the problem for lower funded plans is that excess investment returns have had a smaller impact as asset values fall.


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  #878  
Old 03-02-2020, 01:38 PM
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BENEFIT CUTS


https://www.forbes.com/sites/edwards.../#66811011406a

Quote:
When You’re Told Your Pension Will Be Cut, Take Action

Spoiler:
In the near future over a million American workers participating in as many as 121 multiemployer pension plans will be told that the promises of retirement security made to them by their current and former corporate employers will not be honored.

Promises made will not be promises kept.

These workers will be told to expect their pension benefits will be cut by perhaps thousands of dollars every single month—for the rest of their lives. They will be told they will have to learn to live for decades in retirement—their golden years—on perhaps half of what they expected to receive. Half.

In my experience (having conducted the only forensic investigation of a failed multiemployer plan ever undertaken), the news that pensions are failing and benefits will have to be slashed often comes suddenly—after years of assurances that all is well. Workers can be blindsided by pension cuts they had no reason to believe were coming.

If you are a participant in a failing multiemployer pension—or any other pension globally that is failing—you will have to decide what, if any, action to take when bad news comes.

Today In: Money
Will you simply accept what you have been told? Will you write letters to regulators or legislators objecting to the cuts? Will you seek support from pension rights groups? Will you reach out to media and the public for support? Or will you do something more?

Will you get together with others to organize or crowdfund an “autopsy” of your dead or dying pension, i.e., a forensic investigation? Will you consider bringing a lawsuit challenging the cuts?

Over the years I have watched hundreds of workers—from truck drivers to professional musicians—struggle to respond to the news that pension promises made to them may not be kept.

Much to my surprise, workers are almost always far too quick to simply accept that they will not receive what they have been promised.

A sense of helplessness ensues.

Workers tend to defer to experts. They believe only pension experts understand pensions and only pension experts know how to fix them. In fact, as I discuss in my book Who Stole My Pension?, pension failures are almost always facilitated or caused by so-called pension experts.

There’s never been a pension that failed that didn’t have a roomful of paid experts saying it wouldn’t.

The mismanagement of pension investments amounts to what I call “gross malpractice generally practiced.”

My advice to anyone who is summarily told he or she will lose thousands a month for life in promised retirement benefits is to do anything and everything you can.

You are involved in the fight of your lifetime—a fight over a lifetime of benefit payments.

The widespread collapse of pensions globally is a modern phenomena and the rules regarding the rights and responsibilities of pension sponsors and participants are only now being established.

Little is set in stone.

Further, in my experience, almost no one involved in the pension debate—from regulators, legislators, pension sponsors and participants, to the media—has a clue about now pensions, in reality, operate.

You can have an impact—if you’re willing to join with others participating in your failing pension and the hundreds of other struggling pensions worldwide in the fight for pension justice.


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  #879  
Old 03-09-2020, 08:48 PM
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https://finance.yahoo.com/news/milli...163000369.html
Quote:
Milliman analysis: Multiemployer pension plans' aggregate funding percentage reaches 85% in 2019, matching pre-financial crisis levels
Spoiler:
Higher percentage of these plans are now above 100% funded compared with 2007

SEATTLE, Feb. 25, 2020 /PRNewswire/ -- Milliman, Inc., a premier global consulting and actuarial firm, today released the results of its latest Multiemployer Pension Funding Study (MPFS), which analyzes the funded status of all multiemployer defined benefit pension plans in the United States.

As of December 31, 2019, the aggregate funded percentage of multiemployer plans rose to 85%, up from 74% a year prior, due primarily to double-digit asset returns that exceeded expectations for the year. Overall, multiemployer plan funding levels are now back to where they were in 2007, before the financial crisis, with a greater percentage of plans over 100% funded compared with 12 years ago. However, the picture is much less rosy for troubled multiemployer pensions, with 104 plans now funded below 50%, compared with just 28 in 2007.

"While about 130 plans continue on a path toward insolvency, the majority of non-critical plans have improved since 2007 and are at higher funding levels today," says Nina Lantz, a principal and consulting actuary at Milliman and co-author of the MPFS. "In addition to investment performance, many plans are seeing funding levels increase due to benefit and/or contribution adjustments made during the past decade."

Milliman's most recent MPFS also explores the latest trends in the average discount rate assumption for all plans as well as what may lie ahead for multiemployer plans given potential legislation and unknown investment returns. To view the complete study, go to www.milliman.com/mpfs. To receive regular updates of Milliman's pension funding analysis, contact us at pensionfunding@milliman.com.

About Milliman

Milliman is among the world's largest providers of actuarial and related products and services. The firm has consulting practices in healthcare, property & casualty insurance, life insurance and financial services, and employee benefits. Founded in 1947, Milliman is an independent firm with offices in major cities around the globe. For further information visit milliman.com.


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Old 03-09-2020, 08:55 PM
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PBGC

https://www.rollcall.com/2020/02/28/...funds-at-risk/
Quote:
Retirees’ worst nightmare: Federal backing of pension funds at risk
Looming insolvency of Central States pension plan has stakeholders calling for bipartisan solution

Spoiler:
The colorful history of the Teamsters union’s largest pension fund as a piggy bank for the mob was a driving element in the Oscar-nominated film “The Irishman.” But it will take a lot more than great acting and directing to solve the fund’s current problems.

It’s projected to run out of money in 2025. Already its annual benefits payments are $2.1 billion more than it’s taking in. And the Central States, Southeast and Southwest Areas Pension Plan is committed to paying $40 billion more in benefits to 364,000 members than its dwindling assets can support.

Not coincidentally, the federal backstop to protect such plans, the Pension Benefit Guaranty Corporation, is projected to go under the same year. Its multiemployer insurance fund covers 1,400 union plans with more than 10 million members and has a balance of about $2.5 billion. A growing number of insolvencies by small pension plans will shrink that to about $1.7 billion in 2024. The Teamsters plan will wipe out the rest.

“We’ll take the PBGC down for sure, there’s no doubt about it,” said Thomas Nyhan, executive director of the Central States pension plan.

When that happens, Central States pensioners, currently receiving an average benefit of about $1,400 a month, will get an immediate 20 percent cut since the PBGC’s insurance fund pays a maximum benefit of $1,072.50 a month. Those with 30 years in as a Teamster who receive a $3,000 monthly check can expect a 60 percent cut. Once the PBGC fund balance hits zero things get even worse, as its sole source of revenue will be the $380 million in premiums coming in annually.

Divided among several hundred thousand stranded pensioners, that will amount to “mere pennies on the dollar,” PBGC Director Gordon Hartogensis told the Senate Finance Committee in a closed-door briefing in December, according to prepared remarks provided by the agency.

[Trump taps McConnell brother-in-law, big GOP donor, for Labor post]

Whatever the figure is, it will come out to something less than $100 a month, as that small income stream is divided among Central States retirees, the 66,900 retirees in failed plans that the PBGC was already paying in fiscal 2019 and the thousands in plans that will fail in the next few years.

Pain in the Heartland
Union issues are usually the province of Democrats, but the approaching insolvency of Central States has Republicans and businesses calling for a bipartisan solution.

In this case, “bipartisan” means a fix that will include taxpayer dollars. The PBGC estimates its deficit is $65.2 billion, and there is general agreement that there isn’t enough to be had from retirees and contributing companies to fill that massive hole.

Republicans have a strong political motive to find a solution: About two-thirds of the $2.8 billion in annual Teamsters benefits goes to members residing in congressional districts held by Republicans.

Complicating matters in a presidential election year, battleground states are among the hardest hit. Ohio has the most participants affected, with 42,643 Central States members as of the end of last year. Wisconsin is fourth with 23,074, which is slightly more than President Donald Trump’s margin of victory in that state in 2016. In his 2020 State of the Union address, Trump said rising wages for lower income groups had prompted a “blue-collar boom” in America, but that boast might seem suspect to the tens of thousands of worried retirees in these key states.

Rep. Ron Kind, a Democrat on the House Ways and Means Committee, said his southwestern Wisconsin district with more than 3,000 Central States members will be “a key battleground area in the state” in the race for the White House. “I think it’s going to be an issue, certainly,” Kind said.

In all, 235,000 Central States participants, or 65 percent, live in GOP districts, which helps explain why 29 Republicans joined unanimous House Democrats last June in passing a $68 billion rescue plan that some other Republicans criticized as a bailout.

Rep. David Joyce, a Republican with nearly 2,000 Central States members in his northeast Ohio district, said he is also worried about business owners stuck in the failing plan, facing high costs and concerns about the future.

“It’s not just rank-and-file folks, but it’s the owners of businesses who cannot sell their businesses,” said Joyce, explaining his vote for the bill. Three other Ohio Republicans joined him.

Besides cutting benefits to retirees, another common method of bolstering a plan’s finances is to levy special assessments on participating companies, although that would cut their profits and make the companies less appealing to investors.

For instance, the Alaska Ironworkers fund, which never recovered from the 2008 financial crisis, won approval from the Treasury Department last year for a reorganization plan involving an average 26.5 percent cut in benefits. The fund already required contributing companies to pay not only the normal $4.75 contribution to the plan for each hour a covered employee works but also an added $13.75 an hour in special catch-up assessments. In a filing, plan sponsors claimed increasing assessments further could drive participating companies into bankruptcy.


Wheel of Misfortune
“There’s only three places the money can come from,” said Jean-Pierre Aubry, director of state and local government research at the Center for Retirement Research at Boston College. It can come from benefit cuts, employer contributions or taxpayers. Insurance premiums charged by the PBGC more than doubled in 2015, but that eventually comes out of the pockets of beneficiaries or companies.

Active participants “have been getting the brunt of it recently,” Aubry noted. A 2014 law not only boosted premiums paid to PBGC but also allowed pension plans to temporarily suspend and then permanently reduce benefits as part of plans to restore their finances to solvency.

But only 15 plans have been approved, only one prior to the 2016 elections, and the proposal by Central States, the plan the law was designed to rescue, was rejected. Central States suggested an average benefit cut of 22 percent, but large demonstrations in Missouri, Michigan and elsewhere were followed by a ruling that the cuts weren’t enough to put the plan on a track to solvency.

While most of the 1,400 union plans covered by the PBGC are in good shape, 125 of them with 1.3 million members are projected to run out of money in the next 20 years. Most of those, though, are smaller plans.

Only three of the 25 largest plans were in regulators’ “worst” category — plans that not only are underfunded by a large margin but also are projected to get worse. That calculation is based on 2017 data, the latest year for which all plans have filed with the Labor Department.

Among the big plans, Central States would be the first to go. Aubry predicts that the “800-pound gorilla” will force Congress to deal with the problem before 2025. House members whom CQ Roll Call interviewed suggest Congress probably won’t act during an election year, although this could well be the year when candidates on the campaign trail promise to fix the problem.

Two years ago, Congress created the Joint Select Committee on Solvency of Multiemployer Pension Plans, which expired at the end of 2018 without fulfilling its mandate to recommend legislation to fix the program’s financing problems. The committee reportedly was close to a bipartisan approach that would have included funding from all three available sources: retirees, contributing companies and the federal government.

“We kind of had some hope there was going to be something that was workable, that was fair, that treated taxpayers appropriately but also the retirees,” said Rep. Jim Jordan, a conservative Ohio Republican who voted against the House bill but hopes the consensus almost reached in 2018 by the select committee can be duplicated. Jordan’s district is home to 3,200 Central States participants who received $28 million in benefits last year, 13th among all congressional districts.

Another Republican, Rep. Tim Walberg, has a southeast Michigan district that ranks seventh in receiving Central States benefits. Walberg, a senior member of the House Education and Labor Committee, which has jurisdiction over pensions, didn’t like the House bill with its expensive government guarantees, but he voted for it anyway.

“I’ve been trying to get our leadership to take legitimate action on it for years, and I finally decided if this can get their attention, I’m going to vote for the thing,” Walberg said.

After Central States, the second biggest plan in regulators’ bleakest category is the 110,000-member Bakery and Confectionery Pension Plan, which estimates it will be out of money in 2029. The plan’s deficit topped $7 billion at the end of 2017.

The United Mine Workers of America with 93,000 participants had been expected to be the first of the big plans to run out of money. The UMWA’s projected insolvency date was 2022, but the plan’s largest remaining contributor, Murray Energy, declared bankruptcy in October, pushing the estimate to September.

It became a priority of Senate Majority Leader Mitch McConnell to avoid that catastrophe two months before an election, and the plan, with a deficit of more than $6 billion, was effectively taken over by the federal government in a final fiscal 2020 spending law.


House vs. Senate
In hindsight, this crisis seems due to a miscalculation. The theory was that by having all these businesses in the same industry contributing to a single, central pension, the risk would be spread out. If one company went out of business, the rest would pick up the slack.

Instead, the system concentrated risk in industries and sectors that de-unionized, like trucking, or simply shrunk precipitously, like coal and manufacturing.

But Congress was slow to catch on to the change. Insurance premiums collected by the PBGC remained phenomenally low at less than $3 per member per year until 2006, when the projected shortfall of the agency’s insurance fund doubled to $700 million and premiums jumped to $8 per worker.

Premiums edged up to $12 by 2014, then more than doubled to $26 after the 2014 bill became law. But by that time the shortfall in the fund had exploded to $42 billion and the higher premiums merely slowed down the rate of increase.

The House bill counts on big government-guaranteed loans and targeted grants rather than big premium hikes. Despite the $68 billion cost, the House bill, which would provide an immediate $3 billion loan to Central States, would only delay the collapse of the system, not prevent it, according to the CBO.

In an analysis released last September, the CBO found that about 25 percent of the pension plans that would receive 30-year loans under the bill would not be able to pay them back and would still run out of money. And most of the plans that did repay their loans would become insolvent at a later date.

The law that created the system, the 1974 pension act known as ERISA, does not provide a federal guaranty if the PBGC’s fund fails. It also bars the PBGC from tapping money in its other fund, which insures pension plans at individual companies and has a surplus of nearly $9 billion.

At its core, though, the PBGC is a federal program that collected insurance premiums from pension plans in exchange for a promise that benefits would be paid if the plans failed, said House Education and Labor Chairman Robert C. Scott, a Virginia Democrat.

“I believe, it essentially having sold insurance, that the PBGC is morally obligated to pay the bills” when a plan fails, Scott said. “Whether they have the money or not, the federal government has a moral obligation to make good on the promise.”

“That they didn’t charge enough premiums, that’s not the fault of the people paying the premiums,” he added.

But there’s a limit as to how much in premiums can be raised to address the problem, the U.S. Chamber of Commerce said in comments it filed in January on a Senate proposal that has little taxpayer funding and instead relies on big hikes in insurance premiums and more powers for the PBGC. The Senate proposal was unveiled late last year by Finance Chairman Charles E. Grassley, an Iowa Republican, and Health, Education, Labor and Pensions Chairman Lamar Alexander, a Tennessee Republican.

In its comments, the chamber points out that the Grassley-Alexander proposal would boost the current $29 premiums to $80 per participant, plus as much as $250 more per participant for troubled plans. That’s more than a tenfold increase, which the chamber said would result in the cost being passed along to contributing companies or in cutting benefits and would be “economically unsustainable” for the many union plans that pay modest benefits.

“There needs to be a recognition that government policies (no matter how well-intended) contributed to the current crisis, and the government must contribute to the cost of shoring up the PBGC,” the chamber said.

In its fiscal 2021 budget released Feb. 10, the Trump administration also proposed a large boost in premiums, which it said would raise $26 billion over the next 10 years and at least lower the odds of the multiemployer fund’s insolvency.

Most union plans pay comparatively modest benefits, a fact reflected by the widely different PBGC guarantees. The PBGC pays a maximum of $12,870 in benefits to members of insolvent plans, while it guarantees up to $67,295 for the private single-employer plans. The single-employer fund, though, charges much higher premiums.

Not surprisingly, it is Sens. Rob Portman and Sherrod Brown — both from Ohio, where the Central States insolvency will land the hardest — who have been at the forefront of efforts to find a solution. Both served in 2018 on the joint committee, which Brown co-chaired.

After a vote in mid-January, Portman, a Republican, said he still believes a bipartisan, bicameral bill can be written. “There’s a number of Republicans who care about this issue,” he said.

“I spoke to the Teamsters this morning, in fact, trying to figure out a way to get some Democratic support for a compromise between where we were in the House and the [proposal] … by Sens. Alexander and Grassley.”

The death in January of 58-year-old Chris Allen, who spearheaded Senate Finance’s efforts on multiemployer legislation, complicated the situation. Allen’s passing has slowed efforts on the Senate side, where a replacement is being sought who can engender the high level of trust that both business and labor officials say Allen brought to the task.

Before his committee job, Allen had worked seven years for Kansas Republican Sen. Pat Roberts, a senior Finance member. “It’s no surprise that Chris was such a crucial part of pension legislation,” Roberts said. “During his time in my office, Chris was one of my most trusted advisers. He always had a wealth of knowledge with some of the most complicated financial issues.”


‘Devastating Stories’
Despite its colorful past, the Central States fund largely rebounded after its mob-connected managers were run out and a 1982 federal consent decree put an independent manager in charge of the fund’s investments. In 1982, the pension plan was only 40 percent funded, but it recovered to what would now be considered a “non-critical” 75 percent before getting pummeled by the market downturn in 2000, UPS’ withdrawal from the fund in 2007 and the 2008 financial crisis.

But Central States’ problems are similar to those of other troubled plans: There are too few current workers paying into plans dominated by retirees and “orphaned” workers whose employers no longer contribute. More than half of Central States’ members worked for companies no longer contributing to the plan, and only 1 in 6 members is currently working for a contributing employer.

A June 2018 report by the Government Accountability Office found that the fund’s investment results were actually better than the median result for other big pension plans in most years. However, the plan overinvested in equities prior to the 2008-09 downturn, which knocked funding to below 60 percent, and it never recovered.

By the end of 2019, its assets amounted to only 24.8 percent of what it will need in the coming years to pay benefits.

“We were better off when the mob was running things,” Mike Walden, president of the National United Committee to Protect Pensions, said only half-jokingly. The committee is a Teamsters-created group whose members in their black T-shirts with yellow lettering frequent the halls of House and Senate office buildings.

Walden pointed to a study commissioned by the National Coordinating Committee for Multiemployer Plans, a group representing plans, members and employers, that estimates an economic impact of more than $300 billion over 10 years if the PBGC insurance fund fails. Much of that would come from destitute pensioners applying for help from the social safety nets, including Medicaid and food stamps. A U.S. Chamber official, who asked for anonymity in order to speak freely, quoted from the same study, arguing that as costly as a legislative solution will be, doing nothing will cost more.

“They could have settled this in 2006 for $5 billion to $10 billion,” said Walden, now willing “to bet my house” that the cost will escalate to more than $100 billion before Congress acts.

Along with myriad health problems, these aging retirees have financial responsibilities to children and grandchildren and won’t give up their pensions without a fight, Walden said. He promises a fight showcasing “the 20,000 devastating stories” that Teamsters will tell about their struggles to members of Congress as part of the lobbying effort.

However long it takes to get Congress to act, Ken Stribling, a retired truck driver from Milwaukee, said he’ll keep lobbying for a solution. He has financial obligations to some of his five children and to a grandchild.

Stribling, 68, who was in Washington telling his story in January, spoke haltingly about the promise he made to his wife, Beverly, who died last April of pancreatic cancer: “One of the commitments I made to her was I would stay involved until this was fixed.”


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