Breaking News: Two More Multiemployer Plans To Cut Benefits

According to the MPRA website last week there were five multiemployer plans that had received approval letters to cut benefits:

Today two more officially joined the parade:

Which leaves ten more plans (and 20,000 participants) still in the MPRA crosshairs.

Laborers Local 265 not being on the list above.

16 responses to this post.

  1. Posted by geo8rge on August 13, 2018 at 12:37 pm

    I don’t understand exactly what is going on. If I get it right pension benefit cuts cannot be less than the PBGC guarantee. The impaired pension will be transferred to the PBGC, which will need a bailout soon enough. The PBGC does not guarantee healthcare and other benefits and does not guarantee amounts above the PBGC guarantee.

    So the people who will lose out are:
    1) Those with larger cash pensions
    2) Those that qualify for health care and other benefits. (I am guessing mostly the same people that have the larger cash pensions). I don’t understand why the Senate did not show more interest in healthcare issues.

    But I am wondering how many people will be affected. Of say 10,000 teamsters, what percent got healthcare from the pension plan and what percent of cash payments are above the PBGC guarantee? If there are cuts to cash payments will that allow the health plan to continue on longer? Is it possible for the healthcare bailout to be separate from the cash payments bailout?

    From the PBGC:

    What Happens If a Multiemployer Plan Runs Out of Money?

    For critical-and-declining plans that apply under the Multiemployer Pension Reform Act of 2014 (MPRA) to suspend and/or partition benefits, PBGC continues to insure the plan, whether or not reductions or a partition occurs. See Multiemployer Pension Reform Act of 2014 FAQs and Multiemployer Plans and Partition.

    https://www.pbgc.gov/about/factsheets/page/multi-facts

    Is there a limit on how much an individual’s benefits can be reduced?

    Yes. If you are in a plan where benefits could be reduced, Kline-Miller requires that your benefits cannot be reduced to less than 110 percent of the amount that PBGC guarantees.

    https://www.pbgc.gov/prac/pg/mpra/kline-miller-multiemployer-pension-reform-act-of-2014-faqs

    Reply

    • Posted by PS Drone on August 13, 2018 at 1:55 pm

      Hate to break it to you George, but PBGC itself is on its way to running out of assets. So the PBGC “guarantee” will soon be as valuable as a Wimpy hamburger on Tuesday.

      Reply

      • Posted by geo8rge on August 14, 2018 at 2:11 pm

        “PBGC itself is on its way to running out of assets.”

        So is the Treasury, the DoD, and the rest of the federal government. But every year taxes are raised and the government is funded. So I expect the PBGC and the FDIC to meet their minimum obligations.

        The question is if in this case does the Fed Gov owe a possible small minority of Multi Employer pension retirees more than the minimum PBGC guarantee. My feeling is if you give small numbers of retirees health care you will never reform US healthcare as once they get their health care covered, covered retirees become uninterested or hostile to a universal solution to health care in the US.

        Reply

  2. Posted by geo8rge on August 13, 2018 at 12:42 pm

    When is partition an option?

    For a plan to be eligible for a partition, the plan must be in critical and declining status. The plan must show that it has taken all reasonable measures to avoid insolvency, including maximum benefit suspensions under the law, and that partition is necessary for the plan to remain solvent.

    https://www.pbgc.gov/prac/pg/mpra/multiemployer-plans-and-partition

    The web page has a list of plans that requested partition.

    Reply

  3. Posted by geo8rge on August 13, 2018 at 1:52 pm

    Is UPS required to guarantee the entire Multi employer Teamsters pension system? Or is it just their actual employees?

    Reply

  4. Posted by Tough Love on August 13, 2018 at 8:23 pm

    Off Topic……………

    Last 3 lines from THIS article:

    http://www.wirepoints.com/its-the-pension-promises-stupid/

    Titled: “It’s the pension promises, stupid!”

    ————————————-

    While Illinois may be the extreme, other states aren’t far behind.

    It’s time to stop blaming taxpayers for the pension mess across the country.

    In too many cases, it’s overpromising, and not underfunding, that’s the real cause.

    Reply

    • Posted by Joe Dirt on August 14, 2018 at 1:38 pm

      Over promising and under funding because they can’t raise your taxes to unseen or unheard of levels, otherwise everyone would be moving immediately instead of later ( which will happen ) and making things far worse.

      Reply

      • Posted by Tough Love on August 14, 2018 at 1:50 pm

        The APPROPRIATE comeuppance for this THEFT perpetrated upon NJ’s taxpayers will be DRASTIC reductions in the Public Sector workers’ promised pensions & benefits.

        Reply

  5. Posted by Stephen Douglas on August 13, 2018 at 11:32 pm

    Illinois is in a death spiral for the same reason New Jersey is. That “eye-popping” red line is a red herring.

    And you fell for it!

    Reply

  6. Posted by Stephen Douglas on August 14, 2018 at 12:18 am

    The first line from this comment:

    “This is a horrible article and a horrible comparison.”

    Kenny:

    This is a horrible article and a horrible comparison. The wire points study offers up this comparison as if the liability growth is unusual or unexpected. Given the liabilities are generally being discounted at 7-8% (or more), the expectation is they will grow at 8% even if no one earns any additional benefits so given people are earning additional benefits one would expect them to grow at something more than 8% per year.

    Proper advance funding of the benefits with a focus on 100% funding and amortization of both gains and losses over a reasonable period of time absolutely would result in the ability to maintain contributions at a fairly steady level % of pay contribution. You can argue about issues with the assumptions but any conclusion that attempts to claim that the growth of benefits by itself is the issue and not proper measurement and funding shows a gross misunderstanding of the entire topic.

    If the authors of the study or this article are actuaries they are coming very close to violating Precept 2 of the code of conduct. I question their qualifications to opine on this subject.

    http://www.actuarialoutpost.com/actuarial_discussion_forum/showthread.php?p=9388706#post9388706

    ——————–
    “The wire points study offers up this comparison as if the liability growth is unusual or unexpected.”

    “Given the liabilities are generally being discounted at 7-8% (or more), the expectation is they will grow at 8% even if no one earns any additional benefits so given people are earning additional benefits one would expect them to grow at something more than 8% per year.”

    “any conclusion that attempts to claim that the growth of benefits by itself is the issue and not proper measurement and funding shows a gross misunderstanding of the entire topic.”

    Reply

  7. Posted by Tough Love on August 14, 2018 at 7:28 am

    Quoting ……………

    “Given the liabilities are generally being discounted at 7-8% (or more), the expectation is they will grow at 8% even if no one earns any additional benefits so given people are earning additional benefits one would expect them to grow at something more than 8% per year.”

    Gee, maybe THAT’s the problem (the high 7% to 8%).

    And just to correct you, LIABILITIES are the already-discounted figures, it’s the projected $$$ BENEFITS that are being discounted by those very high interest rates. AND, if those protected BENEFITS were discounted at lower rates, while the SLOPE would be flatter, a graph of the liability line would be ABOVE (yes higher) in all the years, so much so that what wirepoints stated is in fact correct ………… “it’s overpromising, and not underfunding, that’s the real cause.”

    Reply

  8. Posted by Stephen Douglas on August 14, 2018 at 9:10 am

    Wirepoints:

    B.  Total vs. individual pension benefits

    Wirepoints’ analysis does not directly address the generosity of individual pension benefits. Our analysis only examines the growth in total pension obligations – each state’s aggregate promises to its active workers and retirees.

    In other words, this report focuses on the growing accrued pension liability faced by states, just as other reports address the growing aggregate of other debts.
    ————————————

    “over promising”… It’s a logical fallacy. Kenny’s point is that even if no one earns any additional benefits, the accrued liability will continue to grow. That’s the way pensions work. If the proper contributions are made, assets will grow commensurately. That didn’t happen in many states because discount rates were too optimistic.

    It didn’t happen on steroids in Illinois (and New Jersey) because discount rates were to optimistic …and… were virtually ignored anyway, for decades.

    That “eye-popping” red line is mostly a natural feature of a defined benefit system. If proper contributions had been made, you could lay an equally eye-popping green line right on top, for assets, and your system would be one hundred percent funded.
    ———————–
    WP:
    “Wirepoints’ analysis does not directly address the generosity of individual pension benefits. Our analysis only examines the growth in total pension obligations.”

    “overpromising”, or increases in the generosity of individual benefits, is a very small fraction of that thousand percent increase in accrued liability.

    I’m with Kenny… This is a horrible article and a horrible comparison.

    Reply

    • Posted by Tough Love on August 14, 2018 at 9:55 am

      Stephen Douglas/Earth,

      It’s really simple if you weren’t trying so hard to obfuscate whats really happening.

      Ultimately, the amount of the promised benefits (in $$$) is what matters. Liability measures are just estimates of what would is needed to be set aside today to be able to pay the promised future benefits, and as we all know, the higher the rate used in discounting those promised benefits, the lower the liability.

      If the end-point (the promised benefits) is fixed, obviously, if you low-ball the amount of money needed in hand today to be able to make those payments, the slope (or growth in the line over time) will be steeper to get to that fixed end-point than if you had MORE money in hand today because you were not low-balling the value of those future (fixed) payments.

      ———————————

      Wirepoints SHOULD compare the “value upon retirement” * of the taxpayer-funded share of Public Sector pensions vs the retirement security typically granted Private Sector workers by their employers. That retirement-security comparison should be added to wages and benefits (e.g. Healthcare benefit subsidies BOTH while Active and retired) to get total compensation.

      And what FINANCIALLY IMPACTS Taxpayers is the totality of that comparison for ALL workers taken together. In virtually all Cities/States such a demonstration shows that Public Sector “Total Compensation” VERY materially exceeds the Total Compensation of comparable Private Sector workers ………… by (per the AEI Study) 23%-of-pay in BOTH our home States of CA and NJ.

      And THAT is a MAJOR element of the financial woes now impacting Americas States & Cities.
      ———————————————
      * “value upon retirement” ………. DB vs DC, and if DB vs DB the magnitude of formula-factors, the youngest age at which unreduced pensions can begin, the extent of subsidized early retirement factors, the existence/specifics of COLA increases if any, etc.

      Reply

      • Posted by Tough Love on August 14, 2018 at 1:56 pm

        You see, Stephen wants it BOTH WAYS………….

        He supports the use of high rates for discounting projected future benefits (because using lower rates would mean MUCH higher annual contributions, leading to MUCH lower pension promises), but then argues that the steep SLOPE of liability increases (which results specifically from using those high rates that he supports) over time is misleading.

        Sorry buddy. You CAN’T have it both ways.

        Reply

  9. Posted by Stephen Douglas on August 14, 2018 at 9:16 am

    I had a little talk with Earth. He says we are off topic to begin with, and will never, ever agree, anyway, so you may have the last word.

    With apologies to the blog.

    Reply

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