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  #811  
Old 03-08-2019, 02:21 PM
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Mary Pat Campbell
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https://www.bloomberg.com/news/artic...ension-payouts

Quote:
U.S. Companies Get Green Light on Controversial Pension Payouts
By Lynnley Browning
March 7, 2019, 5:37 PM EST
Treasury blesses one-time lump sum payments to retirees
Relief for companies with underfunded defined benefit plans

Spoiler:
Companies are free to tackle their hefty pension obligations through a controversial method involving one-time, lump-sum payouts to retirees and beneficiaries, the Treasury Department says.

That could help companies like General Electric Co., now struggling with a nearly $30 billion shortfall in its defined-benefit pension plan.

The notice issued Wednesday says that the agency doesn’t plan to follow through on a 2015 pledge, made during the Obama administration, to formally outlaw the method. In the wake of that pledge, many companies had stopped offering retirees a one-time lump sum payment, and stuck instead to traditional monthly “annuity” payments.

The Treasury notice was largely a surprise, said Kevin O’Brien, a benefits and compensation lawyer at Ivins, Phillips & Barker. “Without question, yes, companies will do lump sum payments.” He called the notice “a very big deal.”

One-time payouts can reduce the “drag” that pension obligations have on a company’s balance sheet, as well as get rid of the extra premiums companies must pay to the government’s Pension Benefit Guaranty Corporation if they’re underfunded -- meaning that they don’t have enough money to pay current and future retirees.

Data compiled by Bloomberg found that in 2017, 186 of the 200 biggest defined-benefit plans in the S&P 500 based on assets weren’t fully funded to the tune of $382 billion.

The Obama administration opposed lump sum payments over concerns that some retirees might immediately spend their sudden windfall and have nothing left for the future. Still, it had allowed lump sum payouts to workers who were eligible for payouts but hadn’t yet reached a company’s set retirement age, and many companies took advantage of that, O’Brien said.

Because defined benefit plans are generally more expensive to operate, companies have sought to scale them back in favor of defined contribution plans like 401(k)s.

“It was a policy decision,” O’Brien said of the Obama-era restriction, adding that “the Trump administration has undone that.” He said that the Treasury notice will allow companies to tend to “the care of their dying pension plans.”


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  #812  
Old 03-12-2019, 09:04 AM
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CHICAGO SYMPHONY ORCHESTRA

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

Quote:
The Chicago Symphony Goes on Strike Over Pension Plan

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

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

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

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

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

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

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

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

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

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Mr. Muti is scheduled to lead the orchestra in a program of Rossini, Vivaldi, Beethoven and Wagner on Thursday.
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  #813  
Old 03-15-2019, 10:45 AM
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This one is about retirement in the U.S. in general, touching a little on MEPs and public pensions.... but anyway, sounds like she read a book so that I don't have to.

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

But what of retirement benefits?

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

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

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


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  #814  
Old 03-15-2019, 04:02 PM
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Mary Pat Campbell
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LAWSUIT

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

Dated actuarial assumptions challenged

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

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

Read more Insight & Impact from March 2019:

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

Impact

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