Breaking News: Twelfth Union Plan Files

The Intl Assoc. Of Machinists Motor City Pension Fund out of Troy, MI just became the twelfth multiemployer (union) plan to file for benefit cuts under MPRA in an attempt to avoid insolvency.

From their latest 5500 filing here is the plan’s relevant data:

Plan Name: Intl Assoc. Of Machinists Motor City Pension Fund
EIN/PN: 38-6237143/001
Total participants @ 6/30/16: 1,134 including:
Retirees: 634
Separated but entitled to benefits: 303
Still working: 197

Asset Value (Market) @ 7/1/15: $50,999,106
Value of liabilities using RPA rate (3.34%) @ 7/1/15: $159,601,336 including:
Retirees: $116,482,173
Separated but entitled to benefits: $31,696,458
Still working: $11,422,705

Funded ratio: 31.95%
Unfunded Liabilities as of 7/1/15: $108,602,230

Asset Value (Market) as of 6/30/16: $51,181,760
Contributions: $9,795,745
Payouts: $8,685,665
Expenses: $493,832

6 responses to this post.

  1. Posted by S Moderation Douglas on April 8, 2017 at 11:29 pm

    Although MEPs are covered by ERISA and PBGC, I believe I read that their rules are less stringent than for single employer systems. This, coupled with companies going out of business, and effects of two recessions, caused much of their underfunding.

    What of these single employer systems?…

    http://www.zerohedge.com/news/2016-08-22/top-25-underfunded-corporate-pension-plans-are-225bn-underwater

    Their funding status rise and fall seems almost identical with CalPERS and other public systems over the last twenty years. (although their “full funding” may be calculated using a lower discount rate.) How did ERISA fail to control their lack of funding?

    Reply

    • Posted by Anonymous on April 9, 2017 at 1:18 am

      SMD,

      CalPERS and Private Sector Plan funding ratios typically move in similar directions because BOTH invest in similar categories of assets.

      But no one should be fooled by equating ….. “meaning-wise” …. the same numerical funding ratio for a Private Sector Plan vs CalPERS (or other Public Sector Plans).

      Becasue Public Sector interest rate assumptions (for discounting Plan liabilities) are TYPICALLY about 3 percentage points (7% to 8% vs 3% to 4%) higher than those used by Private Sector Plans for an apples-to-apples comparison, the Published “official” Public Sector Plan ratios would have to be reduced by about 1/3.
      ***************************************************

      As a matter of “FACT”, if Public Sector Plans were required to value their Plans using the methodology and assumptions REQUIRED by the US Treasury/IRS of Private Sector Plans, upwards of 2/3 of all Public Sector Plans would have funding ratios below 60% a cutoff below which future Plan accruals are NOT allowed.

      Reply

  2. Posted by S Moderation Douglas on April 9, 2017 at 6:25 am

    I think I said that already…”Their funding status rise and fall seems almost identical with CalPERS and other public systems over the last twenty years. (although their “full funding” may be calculated using a lower discount rate.) ”

    The question being…”How did ERISA fail to control their lack of funding?”

    Reply

  3. ERISA does not apply to governmental plans. https://www.law.cornell.edu/uscode/text/29/1003 at (b)(1).

    Reply

  4. ERISA also cannot control investment return or economic downturns.

    Reply

  5. Posted by Anonymous on April 10, 2017 at 1:24 pm

    Beyond the obvious, while the PBGC/IRS has authority to push for annual contributions that will bring the Plan to full funding in a reasonably short period of time, the PBGC REALLY REALLY does NOT want to wind up taking over MORE Plans, and when a firm is in financial distress (and available resources are obviously need to keep it afloat), forcing full contributions may actually froce it into Bankruptcy …. with a PBGC Plan take-over.

    It tends to work WITH such companies to develop a “plan” to increase funding levels as quickly as is “reasonably possibly” given the financial condition of the company.

    For example, in the recent sale of the Sears “Craftsman” brand to Stanley Black & Decker, the PBGC insisted that the $250 Million that Sears will receive in 3 years go directly into their underfunded pension Plan.

    Reply

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