Central States – Drop Dead Date

According to the people who run the plan:

The Central States Pension Fund that covers 400,000 retirees and active workers will be insolvent by Jan. 1, 2025, and only an act of Congress can save it, the fund’s executive director told members in a conference call Wednesday evening.

Thomas Nyhan issued the insolvency notice in a session aimed at getting those 400,000 members to bombard senators and representatives to save the fund.

“Without your voice, there will be no legislation, and the fund will become insolvent,” Nyhan said on the call.

Based on Schedule H 5500 data from 2009 through 2016 Mr. Nyhan looks a bit of an optimist.

Here is the asset history:

Deposits, payouts, and expenses have been amazingly consistent over the years whereas earnings have, for most years, been on the extraordinary side. Assuming no changes in the cash flow items and using the 6.25% valuation funding rate for asset growth the plan does indeed run out of money by 2025:

Here is the spreadsheet for your manipulation pleasure (on the second worksheet you can insert the ROA for 2017 and later). Now look at the retiree data:

And this policy change:

Nyhan laid out changes in the fund’s investment that he said would have been underway and would make its remaining lifespan more predictable. Central States is selling off much of its stock investments and other holdings that could generate higher returns and delay the insolvency but also carry the risk of losses that would push the fund into insolvency sooner.

It is investing the proceeds from those sales in low-risk bonds and cash-like holdings.

Conclusions:

  • Not much reduction in participant benefits since 110% of PBGC limit is about where the average payout is now
  • No bailout from investment growth
  • No bailout from new employers joining this zombie plan
  • Taxpayer bailout

Only question is method.

 

 

8 responses to this post.

  1. Posted by Tough Love on May 5, 2018 at 9:32 pm

    Let the workers/retirees/companies/Unions deal with it THEMSELVES. They should get ONLY the coverage now prescribed in the PBGC and NO BAILOUT from the Taxpayers.

    Their “pensions” being their retirement security should get bailed out ONLY when all the people who invested their 401Ks (their retirement security) in the Stock market and lost in the great recession (or dot-com bubble, or the 1987 crash. etc.) ALSO get any money they lost back in the form of a bailout.

    Reply

    • Posted by Stanley on May 6, 2018 at 8:34 am

      Right you are. The Kline Miller 2014 act is as good as congress can do in enabling a work out of pension funding problems. This is a bridge too far if there ever was one, or a tar baby that no sensible person would ever get within a hundred yards of. Looking at the Joint Select Committee now in progress, it’s hard to imagine that democrats can agree to anything that five Republican members can go along with. With the few trying to take from the many, I fail to see how this can be a winning issue for liberal democrats.

      Reply

  2. Posted by geo8rge on May 6, 2018 at 12:17 pm

    “Not much reduction in participant benefits since 110% of PBGC limit is about where the average payout is now”

    Average might not be representative. My guess is a third or a half of the pensions are minimal amounts for retirees that worked as a union trucker for a short period of time many years ago. It would be informative if pensions had to report the number of pensions above the PBGC minimum. If I had to guess I would think the % with union health benefits are also the % with larger pension benefits.

    Reply

    • Posted by PS Drone on May 6, 2018 at 2:10 pm

      In a relatively short time frame, one will no longer be able to talk in terms of “PBGC limit” because the PBGC itself will no longer have any wherewithal to pay any benefits. One more example of the wishful thinking progressive textbook running out of wishes.

      Reply

      • Posted by Tough Love on May 6, 2018 at 2:11 pm

        I’m of the opinion that the Federal Gov’t will prop-up the PBGC ….. but only with benefits/insurance as CURRENTLY structured.

        Reply

        • Posted by Stanley on May 6, 2018 at 6:36 pm

          That would be very disgusting considering how slow the pension plan managers have been in applying for adjustments under Kline Miller. If the retirees have not also adjusted their own spending to make limited resources last then they fully deserve to live with reduced means. Alexander says that with one more bailout they will correct their spendthrift ways and do better. Let them eat cake.

          Reply

  3. […] Multiemployer Plans, including Central States, will be looking for a bailout very […]

    Reply

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