The Appropriateness of Keeping Segal in the Multiemployer Business

There is a crisis in the world of multiemployer (union) plans necessitating significant reductions in participant benefits and a bailout after the midterm elections. There are several reasons for the demise of these plans with actuaries one of the more significant abettors. If honest actuarial assumptions were used to value these plans there would be no crisis – and also a lot fewer defined benefit plans as they would be unaffordable to those currently allowed to use factors that inflate funding levels – which is the reason the actuaries doing valuations for 28% of all multiemployer plans in the country do not want the bailout committee to consider forcing the use of honest actuarial assumptions.

In their plea for the status quo Segal Consulting (Segal) took a look at…

  1. two of their well-funded plans that would not be well-funded using lower interest rates,
  2. some random historical interest rates that back up their position (ie. not that Bank of England study showing the period Segal studied as having by far the highest rates over the last 5,000 years), and
  3. trying to gull the bailout committee away from requiring higher contributions that would cause many plans (and the fees Segal gets from them) to disappear.

Of 1091 multiemployer plans with MBs filed for 2016 so far, Segal are the actuaries for 304 of them.

5 responses to this post.

  1. Posted by Tough Love on July 6, 2018 at 6:53 pm

    At some point Segal may be defending the reasonableness of their assumptions, methodology, and advise in Civil suits for damages, and Civil juries don’t have a great deal of sympathy for Professional Service Firms in cases like this (i.e., lower/middle class jurors LOVE to sock-it-to those they perceive as having deep pockets).

    Reply

  2. Posted by boscoe on July 6, 2018 at 9:51 pm

    So are you saying that if (1) a “more honest” (i.e., lower) discount rate were used, notwithstanding the substantial evidence to the contrary provided by Segal; and (2) many defined benefit ME plans would therefore have folded much earlier; and (3) that as a result lots of union workers who actually received and may still be receiving decent pensions would have lost those pensions, that would have been a good thing?

    Reply

    • Posted by Tough Love on July 7, 2018 at 7:26 am

      Is it better to string people along with “promises” that can’t be kept?

      If (from the start) they had smaller/affordable pension “promises”, they likely would have adjusted their spending to save more outside of those smaller promised pensions.

      Reply

  3. Posted by A watcher on July 10, 2018 at 11:20 pm

    How many of those 3o4 are in critical and declining status? Just curious.
    I know Central States is one of them. Has anyone looked at how many others they are in?

    Reply

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