United Mine Workers Update (2)

Last year we did an update on the status of the United Mine Workers of America (UMWA) 1974 Pension Plan. Last week that plan was spotlighted in a new report from the office of U.S. Sen. Joe Manchin, D-W.Va. detailing the pending crisis facing multi-employer pension plan and  claiming:

The UMWA Pension Fund is the most at risk of insolvency. This critical plan, which covers 87,000 retired miners–27,000 in West Virginia-and 20,000 full vested current workers, is projected to become insolvent in 2022. Their insolvency will come even sooner if we see a market downturn or additional coal company bankruptcies.
…….
If plans like the UMWA 1974 Plan become insolvent, participants will receive significant cuts to their pension payments. The PBGC will only be able to provide a fraction of guaranteed benefits for participants in insolvent plans like the UMWA Plan. Currently, the average UMWA pension is $586 per month. If PBGC were to take over the plan, the average benefit would fall by 21 percent to $470 per month, or $5,640 annually.

But there is worse news.

In a March 30, 2018 response to Senator Manchin’s questions, PBGC Director W. Thomas Reeder admitted:

Under most simulations, PBGC’s model of its Multiemployer Program shows our Program running out of money after paying several years of financial assistance to the UMWA Fund. At the point PBGC’s Program runs out of money, the annual financial assistance needs of the UMWA Fund are estimated to be to 10% to 20% of total annual financial assistance needs of insolvent multiemployer plans. PBGC assistance to the UMWA Fund will be a significant factor in PBGC’s Multiemployer Program insolvency and will accelerate that insolvency by a number of months, but it will not be the sole driver of the Program’s insolvency…..Absent changes in law, the Multiemployer Program is likely to run out of money by the end of 2025, about the same time the Central States Fund expects to run out of money. Even if PBGC’s Multiemployer Program is not yet insolvent when Central States runs out of money and requires PBGC financial assistance, the Program would become insolvent almost immediately thereafter.

PBGC’s estimate of benefit reductions:

From the latest 5500 filing:

Plan Name: United Mine Workers of America 1974 Pension Plan
EIN/PN: 52-1050282/002
Total participants @ 6/30/17: 95,990 including:
Retirees: 86,240
Separated but entitled to benefits: 6,264
Still working: 3,486

Asset Value (Market) @ 7/1/16: $3,140,357,000
Value of liabilities using RPA rate (3.18%) @ 7/1/16: $9,469,205,752 including:
Retirees: $8,236,471,290
Separated but entitled to benefits: $525,877,608
Still working: $706,856,854

Funded ratio: 33.16%
Unfunded Liabilities as of 7/1/16: $6,328,848,752

Asset Value (Market) as of 6/30/17: $2,924,500,716
Contributions H-Employers: $21,161,542
Contributions H – Others: $150,893,298
Contributions MB: $31,326,000
Payouts: $662,028,791
Expenses: $29,158,926

14 responses to this post.

  1. Posted by geo8rge on May 9, 2018 at 6:58 am

  2. Posted by Tough Love on May 9, 2018 at 7:57 pm

    Actuary Mary Pat Campbell posted a well-thought-out article today. Definitely worth reading:

    http://stump.marypat.org/article/984/happy-idea-moving-from-defined-benefit-to-defined-ambition
    ———————————-

    It reminded me of a comment I posted in a 3/30/18 BURY Blog-Post Titled …… Peeps Into Multiemployer Crisis…. here:

    https://burypensions.wordpress.com/2018/03/30/peeps-into-multiemployer-crisis/

    The following was my comment (seems Mary Pat and I are of the same mind on this issue):
    —————————————————————————————

    Posted by Tough Love on March 31, 2018 at 12:28 pm

    Taking it to the logical next step…………

    DB Pension Plans can work, if the GUARANTEED level of promised pensions is (MUCH lower than today’s promises) consistent with affordable pricing at that very conservative rate (the 3%), and should investment returns come in greater than that assumed rate, a large portion of those excess earnings can be passed along to Plan participants to add to their guaranteed level of pensions, with a small portion remaining undistributed within the Plan to build up reserves and account for the risk taken by the Taxpayers.

    Essentially, it would operate just like a dividend-paying policy issued by a Mutual Life Insurance Company.
    ————————————–

    Of course we all know why what I just described won’t fly in the Public Sector ………………….. GREED

    Reply

  3. And yet she NEGLECTED to say ” THAT (excessive “generosity”) is now and has always been the ROOT CAUSE of the pension mess spreading across America’s States & Cities. Under-funding is not the CAUSE of the problem, but a CONSEQUENCE of the true root cause …… grossly excessive pension “generosity”.

    Reply

  4. Another well thought out article by Mary Pat Campbell…

    A Tale of two Carolinas…

    Keep in mind when reading this, that, if you believe anything in addition to Biggs “23% public advantage, North and South Carolina are both “market rate” states. In that study, wages were 13% and 15%, respectively, below private wages.

    With pensions and benefits, they were 1%/3% higher than private total compensation.

    “Nearly equal” public and private sector total compensation.

    Yet,

    According to the latest PEW data, North Carolina is 88% funded, while South Carolina is 54%.

    Is pension generosity really the ROOT CAUSE of underfunded pensions, or is it possibly more complicated?

    Pension reform is not just pension reduction. Although it is true, for some states and local governments, reductions are inevitable.

    http://stump.marypat.org/article/669/south-carolina-pensions-liability-trends

    Reply

  5. Following the links in the above article…

    http://stump.marypat.org/article/560/public-pension-primer-payroll-growth-assumption

    “It’s like a mortgage.”

    Even if pensions are reasonable (Got a problem with EQUAL?), what can go wrong, will go wrong.

    Simple mistake. .. what if you “assume” 3% annual payroll growth? And the payroll doesn’t grow?

    Simple answer… blame the state worker for being a greedy moocher.

    Reply

  6. Posted by Tough Love on May 10, 2018 at 8:07 am

    Wow Stephen, 3 comments in succession trying real hard to minimize Mary Pat’s POINT ……….. that Public Sector pensions need to include risk-sharing and that a FAIR way (to BOTH sides) to do so is to use CONSERVATIVE assumptions (e.g., a LOW interest rates) with the benefit level affordable at those LOW guaranteed returns ………. and pass along assets gains ONLY if/when they actually materialize.

    Did you miss her closing paragraph:

    “It’s better to have very low guarantees, with participation in upside results. That way, people can plan appropriately and not be fooled into believing overly sunny promises, which, when they fail, fail catastrophically. “

    Reply

  7. Posted by Stephen Douglas on May 10, 2018 at 11:31 am

    I did not try to minimize anything. It’s a point well taken.

    I merely brought up her _other_ point, that there are very important pension reforms other than plan generosity. And “conservative” assumptions other than discount rates.

    North and South Carolina have very similar wages and pensions, yet North Carolina is listed, along with Wisconsin, as one of the “States That Aren’t Facing a Pension Crisis” (88% funded) in your Bloomberg link. South Carolina? Not so much

    (New York State is also listed… 91 percent funded, and they have pensions more “generous” than New Jersey, or just about anyone else.)

    Pension reform means much more than what you call the ROOT CAUSE. South Carolina is near the bottom of all states in total compensation, has been paying 100 percent of it’s ARC for the last 15 years, and is still only 51 percent funded… and falling.

    Pension generosity is not the ROOT CAUSE of underfunded pensions, and pension reform is not just pension reduction.

    Bias?

    Luke 6:42

    Either how canst thou say to thy brother, Brother, let me pull out the mote that is in thine eye, when thou thyself beholdest not the beam that is in thine own eye?

    Reply

    • Posted by Tough Love on May 10, 2018 at 11:44 am

      Quoting…………… “there are very important pension reforms other than plan generosity”

      Without addressing Public Sector Pension “generosity”, you accomplish NOTHING (just throwing more money into an endlessly GROWING hole)………….and even though you refuse to accept it, the ROOT CAUSE of the pension mess now impacting more and more States & Cites, is unnecessary, unjust, unfair to taxpayers. unaffordable, and LUDICROUSLY EXCESSIVE pension (AND Benefit) “generosity”.

      Reply

  8. Posted by Stephen Douglas on May 10, 2018 at 4:06 pm

    Picture this; Brother Love testifying before a Senate committee, or the local Board of Supervisors… We have to reduce the LUDICROUSLY EXCESSIVE pensions (AND Benefits).

    BOS: And what evidence do you have that these pensions are excessive?

    BL: EVERYBODY KNOWS they are excessive. Plus, I have this ten year old, non-peer reviewed study…

    BOS: Meh, what else you got?

    BL: I GOT CAPS LOCK, DAMBIT!

    LOL! Don’t hold your breath.

    Reply

    • Posted by Tough Love on May 10, 2018 at 5:32 pm

      I could easily do so ………. especially for Police. The audience would include many Private Sector Taxpayers who unlike YOU, would be willing to listen WITH AN OPEN MIND. The math …… shown slowly step by step ……. would make it blatantly obvious.

      Of course I won’t (at least not yet) because of the retaliation that would no doubt result, but I have pondered anonymously sending out thorough/detailed demonstrations difficult to disprove. Perhaps if/when the Police get too greedy (like with a COLA reinstatement being contemplated).

      Reply

      • Posted by Earth on May 10, 2018 at 10:52 pm

        Earth to Brother Love:

        It’s not a lie, if you believe it.

        Still, it won’t convince a judge.

        Reply

    • Posted by PS Drone on May 10, 2018 at 7:53 pm

      “And what evidence do you have that these pensions are excessive”…. only that not one public sector employee in America (in their right mind) would grant such pensions to their own employees if they had their own successful enterprise. They may be greedy, but they are not stupid.

      Reply

      • Posted by Tough Love on May 10, 2018 at 8:18 pm

        I brought that up on the Blog a short while back.

        Many firefighters have side businesses due to their odd schedule with MANY days off. I had asked……… how many Firefighter employers provide THEIR employees with (a) DB pension as rich as theirs, or (b) ANY DB pension …………. going on the say that assuredly the answer to BOTH is NO.
        ————————————-

        P.S. Only time will tell if they are “stupid”. If their continued refusal to accept materially smaller/more-affordable pensions (and/or benefits) now, results in bigger pension/benefit losses down the road, YUP, they sure were “stupid”.

        Time will tell.

        .

        Reply

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