Archive for the ‘Multiemployer Pensions’ Category

HSI(3): “Stunning Ignorance”

Horizon Actuarial Services, LLC (HAS) in their letter to the Bailout Committee criticized this testimony of Joshua Rauh:

15. “Trustees had decades to undertake voluntary, remedial measures before resorting to trying to force participants to take cuts against promised benefits under the Multiemployer Pension Reform Act of 2014 (MPRA). Before reaching this point, they failed to use the many options that were at their disposal to ensure the solvency of plans. They have always had the right to gradually require greater contributions from employers, to make more realistic assumptions about investment returns, and to make more affordable benefit promises on a prospective basis.”

Does not seem too far out there but HAS went ballistic:
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HSI (2): Overfunding Danger

Horizon Actuarial Services, LLC (HAS) kicks off their letter to the Bailout Committee with:

Pension funding is a long term budgeting exercise. Over the life of a pension plan, the incoming total contributions and investment earnings must equal the total benefits paid out (plus expenses to operate the plan). It is, therefore, important to predict the long term investment earnings as accurately as possible so that contributions can be budgeted to satisfy this future benefit obligation. If the benefit obligation is discounted at a rate below the reasonably expected long term investment earnings, the contributions needed in the shorter term will be unnecessarily high….Multiemployer plans invest in fully diversified professionally managed investment portfolios that, over time, are expected to produce earnings well in excess of corporate bonds or Treasury instruments. Therefore, in the current economic environment, using discount rates based on these lower yields would significantly overstate the contributions required to fund future benefits.

Two points that the HAS actuaries are missing:
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Horizon Self Interest (1) – Motive

The Joint Select Committee on the Solvency of Multiemployer Pension Plans (Bailout Committee) heard from ‘stakeholders’ verbally and later in writing. Here are those texts from James Naughton, Assistant Professor/Donald P. Jacobs Scholar, Kellogg School of Management, Northwestern University and Joshua Rauh, Director of Research and Senior Fellow, Hoover Institution, Stanford University.

This week Horizon Actuarial Services, LLC sent an 11-page letter to the committee “to express our serious concern about using corporate bond or Treasury yields as mandated discount rates for minimum funding purposes, which would endanger currently healthy plans, participants, and employers alike.  In this letter, we provide general commentary regarding discount rates plus specific commentary in response to points made by James Naughton and Joshua Rauh in their testimonies to the Joint Select Committee on July 25, 2018.”

Touching on practically every bit of specious reasoning to protect their turf, this letter rates a series and here it is – starting off with the motive.

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Selling Multiemployer Bailout

According to Sen. Sherrod Brown (D-Ohio), citing the Congressional Budget Office (CBO), it will only cost $34 billion over the next 10 years for a bailout of multiemployer plans. Back on July 16 the CBO put the estimate for the Butch Lewis Act of 2017 (S.2147), which would provide government-backed loans to financially struggling plans while avoiding cuts to retiree benefits, at $100 billion over 10 years with this proviso:

The results of a formal cost estimate could differ substantially in either direction based on further clarification.

$34 billion might not even cover Central States but there is one other point that the CBO might not be considering.

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Power Multiemployer Bailout Campaign

It stands for Protect Our Workers Earned Retirement and their website provides this address:

@2018 POWER! P.O. Box 40616, Washington, DC 20016

and this generic video:

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Today the Power Now youtube channel uploaded state (and legislator) specific youtubes urging action be taken to get practical bipartisan and/or sensible solutions (without using the word bailout):

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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:

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Breaking News: Another Multiemployer Plan Files

The MPRA webstie popped up with another multiemployer plan filing to cut benefits. This time it was the Laborers Local 265 Pension Plan out of Cincinnati, OH.

Excerpts from their latest 5500 filing (for the 10/31/16 year end; we should have 10/31/17 next week):

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