My SFA Blunder, But….

In reviewing the amounts that insolvent multiemployer plans were asking from the government under the PBGC Special Financial Assistance program I noticed that the Carpenters Industrial Council of Eastern PA Pension Plan was looking for much more money when compared to their RPA liabilities then every other plan. I assumed this was a mistake in the 6/1/19 Schedule MB filing where the interest rate used for valuation purposes was left blank so 0% was used in the application calculation.

I now see my mistake. 0% was the interest rate they intended to use for the 6/1/19 valuation but how they got there makes what they did much worse, primarily for other actuaries.

The Carpenters Industrial Council of Eastern PA calculates needing 217.2% of unfunded liabilities for one simple reason. When they get their $14 million they are expecting to make $0 in trust earnings on it for 30 years (see below).

In the available Schedule MBs on http://www.efast.dol.gov for this plan the valuation interest rate was 6.5% as of 6/1/16, 6/1/17, and 6/1/18. This is supposed to be a ‘best estimate’ made by the actuary. On 6/1/19 that ‘best estimate’ went down to 0%. It was the same actuary for all four years.

The|Schedule MB for 6/1/19 was signed by the actuary on February 22, 2021.

The American Rescue Plan Act was introduced on February 24, 2021 and signed on March 11, 2021 but a bailout for union plans was discussed well before then.

Once an MB or SB is signed the assumptions cannot be changed so as to avoid gimmickry so the other insolvent multiemployer plans who did not have a ‘come to Jesus’ moment on their interest assumptions cannot go back and amend their filings to get their clients twice as much money from this bailout.

Is this an example of actuary being smart or shady? Are the other actuaries who did not have the foresight to tailor their assumptions to the situation dumb or ethical (or too early in filing)?

I will leave it to the PBGC (or some other government agency) to rule.

If this application gets approved then PBGC is surely working with a rubber stamp and not a fine-tooth comb.

7 responses to this post.

  1. Posted by Ray Shorter on November 9, 2021 at 10:56 am

    I still wonder why funds haven’t restored benefits before applying?

    Reply

    • Posted by aon12345 on November 9, 2021 at 1:35 pm

      Ray, in many cases they can’t – the trust may not have the money to restore benefits, certainly insolvent plans don’t have the money to pay the higher benefits to participants. So they have to wait to get the money from treasury before restoring benefits.

      Reply

  2. Posted by aon12345 on November 9, 2021 at 1:39 pm

    It is amazing how you blunder even when recognizing your past blunders and then make even more errors in trying to explain away your past errors.

    You keep blaming actuaries for reading the law and complying with it. Then you make invalid comparisons between current liability and the liability associated with the SFA. These are very different benefit streams so no comparison can be made.

    And then you say the fund expects to earn 0 on the SFA money when it is the law that states that this must be done.

    Just because the actuaries working in the industry are far more knowledgeable than you are does not mean you should blame them for a law they had no part in creating.

    Reply

    • Posted by Pat Whalin on November 10, 2021 at 7:52 am

      oh, just shut up.

      Reply

      • Sounds like good advice counselor.

        Reply

      • Posted by aon12345 on November 11, 2021 at 3:31 pm

        What is the issue, I made some inquiries about his lack of knowledge in this area. Since he appears clueless he should not be blogging about it.

        As I stated above, he said that “they are expecting to make $0 in trust earnings” – any real actuary would know that this is not the truth. Rather it is a requirement of the law.

        Are you saying the actuary should ignore the law leading to a rejected application or do you just enjoy misrepresenting the actuarial community and ignoring the law?

        Reply

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: