Election Certainty

This Friday, January 20, a particularly farcical election cycle, where outcomes are predetermined as the voting public  is anesthetized to real issues by a spate of diversions and misinformation, will end.


On December 30, 2016 a ballot went out to 1,995 participants in the Iron Workers Local 17 Pension Fund informing them that:

  • 52% or 1,029 of Participants will not have any reduction
  • 8% or 168 of Participants will have their benefits reduced up to 10%
  • 10% or 197 of Participants will have their benefits reduced by 10 to 20%
  • 13% or 265 of Participants wil have their benefits reduced by 20 to 30%
  • 10% or 191 of Participants will have their benefits reduced by 30 to 40%
  • 6% or 115 of Participants will have their benefits reduced byt 40 to 50%
  • Under 2% or 30 of Participants will have their benefits reduced by 50 to 60%

The voters were further informed:

If you do not vote or if your vote is received after 5:00 PM ET, January 20, 2017, you will be treated as though you voted to approve the benefit reduction. In other words, your failure to vote on time is the same as a vote in favor of the benefit reduction. This treatment of non-voters is required by MPRA.

So what if the vote goes the way it has been fixed to go?  Near the end of the 7-page Explanation of Ballot that voters got, if they weren’t already thoroughly confused and disgusted by then, they would have found:

mpra-expl

Some definitions:

  • certified: guaranteed; reliably endorsed
  • uncertain: not to be depended upon; unreliable

Three years ago the plan’s funded ratio was at 23.91% with the average retiree getting an annual pension of $17,500. One thing certain that can be certified is that a mere 20% overall reduction in benefits will NOT avoid insolvency.

10 responses to this post.

  1. Posted by skip3house on January 15, 2017 at 7:01 am

    Many of us are in this position, or similar conditions, because of being allowed to think math/arithmetic is measles and actuaries are brain surgeons.

    How many times have you run into people who will not even listen to reason with the excuse of hating math logic in school and finding no need for it as adults?

    Just a blank stare when you try to say Mathematics is the language of our Universe.

    Reply

  2. Posted by Eric on January 15, 2017 at 8:42 am

    They are just buying time, John, just buying time…
    A controlled collapse, until suddenly, things happen very quickly.
    Eric

    Reply

  3. Do we know anything about the likely characteristics of the 2% of participants whose monthly checks will drop by more than 50%?

    Reply

    • Posted by George on January 15, 2017 at 3:14 pm

      The document in the article has some examples of benefit reduction calculations.

      https://www.treasury.gov/services/Documents/14_EXPLANATION_MPRA_MODERN_IRONWORKERS-865631102779296874.pdf

      Reply

    • Posted by George on January 18, 2017 at 4:45 pm

      Local coverage: $2,500 to $1,000 a month.

      The one plan approved by Treasury is for an Ironworkers union in Cleveland. Members of Local 17, with about 2,000 participants and about 700 retirees, are voting this month on a plan that, if approved, would cut benefits beginning with the Feb. 1 payment.

      The average cut would be 20 percent, but because of the way the law was written, the impact will vary significantly. About half of the plan’s participants wouldn’t see any change in benefits while 2 percent would see a cut of 50 to 60 percent, according to the union.

      “It’s horrible. There is no other way to put it,” said Pat Overstreet, 63, of Hinckley, whose husband, Walter, is among the small group that would suffer the biggest cut. She said that if the plan is approved, she and her husband will net about $1,000 a month compared with $2,500.

      “It affects everything you do,” she said of that kind of cut. “What you’re going to eat to where you’re going to go to selling the house.”

      http://www.dispatch.com/content/stories/business/2017/01/17/retirees-working-to-preserve-pensions.html

      Reply

  4. BTW, this Plan shows yet another reason to take a Disability Pension: No reduction even if the rest of participants vote to reduce their own checks.

    Reply

  5. And oh one more thing: with the majority (52%) of voters due to receive no reduction at all, this effectively puts 52% as the lower bound of the proportion that will vote ‘yes’.

    Reply

    • Posted by bruce paterson on January 16, 2017 at 4:38 pm

      NY-you bring up a psychologically intriguing dilemma. What will the 52% vote?. You are saying they vote “yes”. I feel it would be a vote for “no” since union brothers stand together normally and would protect each others pension for a “full pension” even though that may be the frivolous direction. Scenario: you are the one who is getting a pension cut–your ironworker brother next to you is still getting his full pension. How would you feel if you found out your brother voted the ‘no” to cut your pension while saving his full pension? Betrayed? This is going to create a lot of ill-will and suspicions among the union members. Maybe the 52% should just not be allowed to participate to level the field, or maybe avoid voting, but then thats an issue also as it would be taken as cut my brothers’ pensions.

      Reply

      • Posted by NY on January 17, 2017 at 9:17 am

        This is a fair point; we’ll have to wait a few more days to see. It’s worth noting that MPRA’s ballots are secret votes, unlike Card Check, in which each member’s ‘vote’ is known to all other voters (like a member’s vote in Congress): https://en.wikipedia.org/wiki/Card_check.

        There’s another nuance I didn’t quite grasp initially: Some fraction of the 52% may have low enough monthly checks that their $$$ would be the same (i.e. under the PBGC limit) under either a ‘Yes’ vote or under a plan insolvency that is subsequently administered by PBGC. For these participants, the outcome of the vote doesn’t matter (except for the possibility of PBGC ultimately not paying, at some point down the line).

        Also, a general point about the MPRA ballot process is that the information provided to voters about benefit cuts is quite limited (perfect for low-info-voters). If I were deciding whether or not to vote to cut my own benefits, I’d want much more information (beyond what’s currently in the ballot-packet) about how my cut relates to other cuts. For instance, the packet should include a calculation of Gini-coefficient ‘before’ and ‘after’, the ‘before’ and ‘after’ monthly-payment of the top 1%, 5%, of recipients, etc. I’d also want to know that the salaries/perks of the pension-fund’s employees were trimmed, in the interest of shared-pain…

        Reply

  6. Posted by Theodore Konshak on January 16, 2017 at 5:54 pm

    I have not looked at Schedule B filings. But if funds for this pension plan were accumulated during the working lifetime of the participants, as is the philosophy of ERISA, and if the actuarial methodology and operation of the pension plan was conservatively done, as was stated as the basis for paying such low insurance premiums to the PBGC in the first place, how could this pension plan ever become 23.91% funded? Don’t blame it on investment return because the actuarial assumptions would have been conservative under this philosophy. And don’t blame it on demographics because funding during the working lifetimes of the participants means one generation doesn’t fund the benefits of another. Somebody or someone was asleep at the switch. And for a long time.

    Reply

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