- The government will not protect your pension
- Actuaries for these plans are not independent
According to a website to keep Central States Pension Plan participants informed (or distracted):
Like many of our nation’s multiemployer pension funds, Central States Pension Fund has become severely underfunded and is headed toward financial failure. If action is not taken soon to address this funding problem, by 2026, Central States Pension Fund will run out of money and be unable to pay benefits to current and future retirees.
How did the Fund become so severely underfunded?
Baby Boomers are retiring in record numbers and the union workforce has been steadily declining for years. As a result, the Fund currently has more than three times as many retirees as active members — so, far fewer contributions are coming in than benefits being paid out.
Checking out the 5500 filing for 2013* for the plan confirms that dire situation and leads to two obvious questions:
- What will happen to the participants?
- Could this not have been anticipated?
The real answers which are unlikely to ever appear on any rescue website:
- Some government official will eventually decide how much participants get of whatever money remains and yesterday the Central States participants got a name: Kenneth Feinberg
- Too often actuaries are not paid to predict for accuracy but for convenience. Most actuaries living in the real world can see baby boomers retiring and union participation declining but including those factors in liability calculations would not serve the interests of those who have to pay benefits or hire actuaries.
* The 5500 is 424 pages though 175 of those pages are the Schedule C which is where anyone getting over $5,000 out of the trust in that year has to be reported. The main reason that the PBGC is not directly taking over the plan and making payments is that the input from the remaining employers still in the plan would be shut off so the PBGC allows those 175 pages of payees to keep bleeding money out of it while doing much of the administration work that the PBGC would otherwise have to do.