PBGC Claiming Westinghouse MTIA Worthless?

The reporter recently contacted me on this story:

WILMINGTON, Del. (Reuters) – Employees of U.S. nuclear power firm Westinghouse Electric Co LLC, which is bankrupt and reeling from a failed reactor project, got a nasty surprise recently: in the eyes of the U.S. government’s pension insurer, its retirement plan has a massive shortfall.

While bankrupt companies often have big pension deficits, the vast majority flag the underfunding years in advance of filing for Chapter 11. By contrast, the Westinghouse Electric Co Pension Plan, which has about 9,700 participants, appeared fully funded in its most recent report to the Department of Labor in 2015.

That was the question and this is what I found out (and did not find out):

Last March the Westinghouse Electric Company filed for bankruptcy however, according to the 5500 filing they made for 2015, their Defined Benefit Plan was 115% funded. So why did the Pension Benefit Guaranty Corporation (PBGC), which would not be covering all benefits anyway, file a claim as if the plan had no money?

According to the 5500 filing the plan keeps their money in a Master Trust Investment Account (MTIA):

I posted the question that I ask you people here:

Could an MTIA really be worthless in a bankruptcy? Or could this be the PBGC filing a routine claim to protect themselves?

27 responses to this post.

  1. Posted by Daniel E. Mangan on September 24, 2017 at 4:38 pm

    John, I’ve been out of the pension field for many years, but I think we have a mismatch here between the EIR on the SB and the going rate for buying retirement annuities. In other words, the 115% AFR is not a realistic figure.

    Reply

    • I agree, the HATFA rates in the SB understate the liabilities, especially in the case of an underfunded plan (which this isn’t supposed to), but those rates are not chosen in any scientific manner to get the most accurate results based on an examination of where the assets are invested. In the case of HATFA rates they are random factors propagated by the IRS because the MAP-21 factors were developing minimum contributions that were too high for the liking of those who donated to congressional campaigns.

      However, even with that a plan that is 115% funded under HATFA rates should not be a disaster yet. And with the PBGC only covering benefits up to a dollar limit and phased-in over years of service you would expect a lot of the benefits to be covered by existing assets (if they actually exist). That was the point of my questions (which both the benefislink and ACOPA people seem to have ducked). Is the PBGC worried about what happens to an MTIA in bankruptcy or is this just the PBGC doing their duty to the public (and themselves) by putting in an inflated claim?

      Reply

  2. Hi burypensions,
    I was hoping to contact you personally about a project I am doing for journalism! I am a student at Ithaca College. I look forward to hearing from you. My email is kmirand@ithaca.edu. Thank you!

    Reply

    • Posted by Tough Love on September 26, 2017 at 12:21 am

      From the linked article…………..

      The top 10 pension recipients in 2016 include nine scholars and scientists who spent decades at the university: doctors who taught at the medical schools and treated patients at the teaching hospitals, a Nobel Prize-winning cancer researcher and a physicist who oversaw America’s nuclear weapons stockpile.

      The exception is Yudof, who receives a $357,000 pension after working only seven years.

      Under the standard formula — 2.5 percent of the highest salary times the number of years worked — Yudof’s pension would be slightly more than $45,000 per year, according to data provided by the university.

      But Yudof negotiated a separate, more lucrative retirement deal for himself when he left his job as chancellor of the University of Texas to become UC president in 2008.

      “That’s the way it works in the real world,” Yudof said in a recent interview with The Times.

      The deal guaranteed him a $30,000 pension if he lasted a year. Two years would get him $60,000. It went up in similar increments until the seventh year, when it topped out at $350,000.

      Yudof stepped down as president after five years, citing health reasons. Under the terms of his deal, his pension would have been $230,000. But he didn’t immediately leave the university payroll.

      First, he collected his $546,000 president’s salary during a paid “sabbatical year” offered to former senior administrators so they can prepare to go back to teaching. The next year he continued to collect his salary while teaching one class per semester, bringing his tenure to seven years and securing the maximum $350,000 pension.

      Reply

      • Posted by Seesaw Junior on September 26, 2017 at 2:30 pm

        First, he collected his $546,000 president’s salary during a paid “sabbatical year” offered to former senior administrators so they can prepare to go back to teaching.
        Yudof was NOT a teacher or Professor, and he certainly was NOT “going back to teaching” after his “sabbatical”. In fact as an administrator he would not even be entitled to a “sabbatical”. So in essence this is a FRAUD. And Yudof should NEVER have been allowed to stay on the UC payroll to “spike” his pension by $100K for teaching ONE CLASS over the following years. Yudof is defrauding the UC Pension system. The UC pension system should FLAG Yudof’s pension and lower it down to $230K/year, which is still about 75% too high. CalPERS cut Bruce Malkenhorst’s pension, from the City of Vernon CA, from $500K+ down to $115K. UC Pension could so the same to Yudof.

        Reply

        • Posted by Tough Love on September 26, 2017 at 3:15 pm

          Two comments:

          (1) Assuming his $546K salary was the same for all 7 years, that’s $3.8 Million. Add to that the COLA-increased annuity starting at $350K annually … with a “value” of $5 to $7 Million depending on his age at retirement…. call it $6 Million…….. and we have a UC Administration that agreed to a compensation package of $3.8 Million + $6 Million = $9.8 Million over 7 years or $1.4 Million PER YEAR.

          Not Ludicrous ?????

          And as you stated, does it violate any terms of CalPERS-administered pensions?

          Are there no controls over how much they can pay ? What stops the next guy from getting $2 or $3 Million per year ?

          (2) The IRS imposes a $ cap on annual pensions (which varies with age). The $350K is WAY over that cap and the excess cannot (legally) be paid from the Pension Plan’s Trust funds. Are they ignoring that ?

          Reply

          • Posted by Anonymously on September 27, 2017 at 11:32 am

            Two scholars, Dr. X and Dr. Y, complete their degrees the same year at Harvard. Dr. X takes a job at an elite private university. Dr. Y takes a job at a UC campus. Both go on to brilliant careers.

            Dr. X’s university has no pension plan, but it opens a stock fund for its employees, and both the university and the employees contribute to it. Employees can do this easily because the salaries are very high. Moreover, Dr. X lives in a subsidized apartment and her kids have their college tuition paid for by her employer.

            Dr. Y also becomes a famous scholar and is recruited by many other universities. However, she loves UC — the creativity of the campus community, the mission of public education, the extraordinary students. She has trouble saving because salaries in her field are much lower at UC than other elite schools. She has to take out loans for her kids’ education.

            When she retires, she doesn’t have much besides her UC pension. But she gets an added bonus — she gets to be insulted by The Times (“six-figure pensions”!). Not to worry, though — the next generation’s Dr. Y will not bother to come West.

            Timothy Hampton, Kensington, Calif.

            http://www.latimes.com/opinion/readersreact/la-ol-le-uc-pension-tuition-mark-yudof-20170927-story.html

          • Posted by Tough Love on September 27, 2017 at 12:45 pm

            Anon /Timothy Hampton, Kensington, Calif.,

            I see from you identical comment posted on your linked article that you are a professor of French and comparative literature at UC Berkeley.

            While accomplished MDs can often find comparable and sometimes even higher-paying Private Sector jobs, I doubt that such is true in your specialty, and given that DC Plans are the norm in Colleges/Universities (NOT the FAR FAR more generous Final Average Salary DB Plans offered in some Public Sector Universities, including UC), I suspect that you’re simply looking to protect/justify your MUCH MUCH higher UC Total Compensation package (because of your LUDICROUSLY excessive pension) that you would NOT likely find ANYWHERE in the Private Sector.

  3. Posted by Anonymously on September 27, 2017 at 1:06 pm

    I really think it’s unfortunate the poor guy didn’t have one of those LUDICROUSLY EXCESSIVE Final Average Salary DB pensions. All he had was…

    “….he’ll get to continue earning his unvested stock compensation, including options and performance-based awards, as though he were still working at the company, according to Equifax policy.”

    Up to $90 mill.

    At age 57.

    Probably won’t even get subsidized healthcare.

    Definitely not EQUAL.

    Reply

    • Posted by Tough Love on September 27, 2017 at 1:21 pm

      Equifax SHAREHOLDERS are paying for the fallout from the data-breach as well as his very high compensation ……………… not Taxpayers.

      Reply

  4. Posted by S Moderation Honestly on September 27, 2017 at 2:32 pm

    Neither Mark Yudof  nor Richard Smith are “typical” employees. Each is at the top of his field, respectively, and paid accordingly.

    In the private sector, there are hundreds of thousands of employees who may or may not have DB pensions, but have pay and other benefits well in excess of Mr. Yudof. Not just CEOs of major companies like Equifax, but lower level execs, managers, attorneys, etc.

    “Paid by the taxpayers” is a joke. Unless you live in a cave, you are directly or indirectly paying these salaries and benefits and there is absolutely nothing you can do about it.

    And…

    I’ll wager you a dollar to a barrel of peas that Richard Smith’s tax deductions last year were greater than your annual income, taxpayer.

    SMH

    Reply

    • Posted by Tough Love on September 27, 2017 at 2:45 pm

      In the Private Sector, the compensation granted a company’s executives works it’s way into the cost of the company’s products and/or services, and consumers of those products or services can CHOOSE to shop elsewhere if they find the cost too high.

      WHEN/WHERE (not IF) we find the cost of Police (and many other Public Sector) services LUDICROUSLY excessive, we have no CHOICE to shop elsewhere.

      Reply

  5. Posted by S Moderation Honestly on September 27, 2017 at 3:45 pm

    You could vote with your feet…

    http://www.chicagotribune.com/news/ct-ptb-gary-police-quit-st-0710-20150709-story.html

    But that’s not really the point.

    Point being, there are thousands (hundreds of thousands) of private sector jobs which, even without pensions, pay equal to, or much more than similar public jobs. That’s the market.

    In New Jersey if a private company needs a new pickup truck, they will have to pay at least $30-35k. If the state or county needs a new pickup truck, guess how much they will have to pay? Yes, $30-35k. That’s the market.

    But the state can pay lower wages and compensate with better pensions. In the upper echelons, though, they will never come close to private sector compensation.

    And you’re not likely to see one of these in a public office parking lot.

    http://www.gmc.com/previous-year/sierra-2500-denali-hd-pickup-truck.html

    (Careful, if you repeat yourself too much, Earth is probably following.)

    SMH

    Reply

    • Posted by Tough Love on September 27, 2017 at 4:58 pm

      Quoting SMH ……………..

      “Point being, there are thousands (hundreds of thousands) of private sector jobs which, even without pensions, pay equal to, or much more than similar public jobs. That’s the market.”

      LOL ……………. well, with a 23% (higher if Safety workers were included) Public Sector “Total Compensation” ADVANTAGE in both ours States of CA and NJ, any number (of higher compensated Private Sector workers) that do so exist, must be overwhelmed bay a FAR FAR FAR greater number of MUCH higher compensated Public Sector workers.

      Quoting SMH ………….

      “In New Jersey if a private company needs a new pickup truck, they will have to pay at least $30-35k. If the state or county needs a new pickup truck, guess how much they will have to pay? Yes, $30-35k. That’s the market. ”

      LOL ………….. Trucks are “products”. Public Sector workers don’t produce “products”. they sell their “services” at a cost MUCH greater thjan necessary, fair to Taxpayers, or afffodrable.

      Quoting SMH……….

      “But the state can pay lower wages and compensate with better pensions. In the upper echelons, though, they will never come close to private sector compensation.”

      Doesn’t matter (even In the cases where true). What financially impacts taxpayers is the Public/Private Sector total compensation differential from ALL WORKERS TAKEN TOGETHER………… and it’s 23%-of-pay greater in the Public Sector in both CA & NJ.
      But you know that. It just doesn’t fit in with your agenda.

      Reply

  6. Posted by S Moderation Honestly on September 27, 2017 at 6:26 pm

    You might have a point in there, somewhere, if the 23% (of compensation, not “pay”) were true, either today or in 2012.

    And there is a “market” for services. You have said so yourself…
    “Because 85% of all workers are employed in the Private Sector, it is THAT sector that rightfully determines “market rate compensation” …whether coming from wages, pensions, or benefits”*

    “Doesn’t matter” ?

    If it “doesn’t matter” that more highly educated state workers earn less, and least educated public workers earn much more than their private sector peers?

    Were that the case, we could pay every public employee the same salary, probably around $70,000 for full time, with commensurate pensions. Then you could reduce all pay to $53,900 (23% lower) which would reduce FAS pensions by the same percentage.

    Good news for janitors, not so much for professionals,

    and…

    absurd on it’s face.”But you know that.”

    *If the Private Sector is 85% of all workers, then the remaining 15% would be very influential on “market wages”. That is a large segment of the workforce.

    Imagine if you run a mid-sized janitorial service in Bergen County. You could offer minimum wage, and go through constant employee turnover, with all the attendant costs of recruiting and training, or you could offer better wages/benefits and get more reliable, productive employees. All the while knowing that public sector jobs compensate 50% more, when benefits are included. (That’s average, due to healthcare alone, the public advantage for a large family could be 90%, or more.)
    Would that have any affect on your salary offer?

    That comes under the heading of “race to the bottom”, or “Walmartization of the workforce.

    SMH

    Reply

    • Posted by Tough Love on September 27, 2017 at 8:13 pm

      Splits (by educational attainment) DO NOT MATTER …. from the perspective of the net financial impact on taxpayers.

      And if it were the opposite (with the Private Sector having the net compensation advantage …. and CERTAINLY one as large as 23%), the Public Sector Unions would be S*C*R*E*E*M*I*N*G for “equal compensation”.
      *************************************************************

      Quoting SMH ……………

      “Imagine if you run a mid-sized janitorial service in Bergen County. You could offer minimum wage, and go through constant employee turnover, with all the attendant costs of recruiting and training, or you could offer better wages/benefits and get more reliable, productive employees. ”

      There’s a critical point that achieves the best balance between cost (compensation) and a reliable/effective staff (retention). Clearly Public Sector workers have been granted compensation packages far ABOVE that critical point.

      Reply

  7. Posted by S Moderation Honestly on September 27, 2017 at 9:50 pm

    From somewhere deep in the interweb archives…

    Mike W writes:

    @ Peter: So yes the low level guys make out but that it intentional and the high levels guy get screwed on pay but the government compensates by making them nearly unfirable.

    So then how are they “screwed on pay” if their job security is an element of their compensation? I often hear this argument from upper-educated public employees (including those in education) that they not being paid what they are *worth* compared to similarly educated private sector workers. So why do they stay in the public sector?
    :::::::::::::::::::::::::::::::::::
    Tom West writes:

    So why do they stay in the public sector?

    Following that line of reasoning, it’s tautologically impossible to *ever* be ‘screwed on pay’, in either the public or private sector.
    ::::::::::::::::::::::::::::::::::::::

    S*C*R*E*E*M*I*N*G is non-productive. (Also not a real word but, whatever) As Tom West suggested, if a private sector janitor feels underpaid, she can apply for a public sector job. A public sector attorney can likewise move to the private sector to improve his lot. It happens all the time. Only about 20% of public workers are “full career”, and the average tenure for public workers is about eight years. People constantly move back and forth between the sectors. “Show me the money.”

    SMH often says, you can’t tell the players without the program. Most “public sector” workers are actually just good ol’ private sector boys on one of several jobs they will have in their careers.

    Which is why SMH also says…

    SMH

    Reply

    • Posted by Tough Love on September 27, 2017 at 10:11 pm

      The “enemy” is the self-interested, vote-selling, contribution-soliciting, taxpayer-betraying Elected Officials who willingly SELL their favorable votes on Public Sector pay, pensions, and benefits ……….. for Public Sector Union campaign contributions and election support. Bribery, racketeering, and extortion in any other venue.

      And of course the insatiably greedy Unions & workers adds to the problem.

      Reply

  8. Posted by Earth on September 27, 2017 at 10:59 pm

    Earth, to whom it may concern,

    You are regressing again.

    And totally off topic.

    Reply

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