The Central States Pension Fund did it last September and last week a second Multiemployer (Union) plan started the process to reduce core benefits.
There are many Union Plans that are as badly funded as your typical government plan (when valued honestly) since, even though Union Plans have rules, they have some ‘flexibility’ that allows them to keep using 7.5% interest rates for funding and, since 2014, cut benefits when they deem appropriate which is exactly what the Iron Workers Local 17 Pension Fund wants to do.
A little perspective:
As I predicted last June a government official (Kenneth Feinberg) is deciding how much participants get of whatever money remains and, though the participants get to vote, their vote only counts if is for the cuts:
Even if a majority votes no….the law requires the Treasury Department to impose the changes, once it approves them, if it deems that the Iron Workers fund is so large that it qualifies as “systemically important.” That means that if it collapsed, it could take down the multiemployer wing of the Pension Benefit Guaranty Corporation, jeopardizing the retirees who currently get their pensions through the program.
So much for legislated democracy.
Checking out the plan’s 5500 filing for 2013 here are the important numbers as of 4/30/14:
- Trust assets: $91,889,710
- Number of retirees: 1,125
- Annual Benefit Payouts: $19,453,719
- Average annual payout: $17,292
- Annual Contributions: $16,794,821 (if you believe the Schedule H)
- Annual Contributions: $11,769,883 (if you believe the Schedule MB)
- Plan funded ratio as of 4/1/13: 38.4%
That last number – 38.4% – is based on a 7.5% interest rate and is about the average ratio of the plans that Illinois sponsors.