Four Pension Funds Apply for Benefits Reductions

Requests for benefits reductions have picked up this spring, as Treasury Department filings show four pension funds recently applied for benefits cuts under the Kline-Miller Multiemployer Pension Reform Act of 2014. They are the Sheet Metal Workers Local Pension Fund, the Plasterers Local #82 Pension Plan, the Pressroom Unions Pension Trust Fund, and the Plasterers & Cement Masons Local 94 and Pension Fund. That brings the total to five plans seeking benefits cuts so far in 2018. A total of 10 applications were filed in 2017, nine in 2016, and two in 2015.

Sheet Metal Workers Local Pension Fund (OH)

The Sheet Metal Workers Local Union #33 of Parma, Ohio, represents more than 4,500 skilled craftsmen throughout Ohio and West Virginia. The fund’s application proposes a reduction in monthly benefits in that the revised monthly amount is based on a level accrual rate of $48, multiplied by years of service earned through April 30, 2019.

Participants whose current level accrual rate under the plan is less than the $48 post-suspension level accrual rate would not have their benefits reduced. A participant’s current level accrual rate is determined by dividing their present earned benefit amount by their years of service. It also said that no special groups of participants will be treated differently except those required by law. There would be no reduction for participants or beneficiaries with benefits based on disability, or participants or beneficiaries who are at least 80 years old on May 31, 2019. Meanwhile, participants or beneficiaries who are at least 75 on May 31, 2019, will have a lesser benefit reduction.

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The plan’s actuary certified its funding status as critical for 2009 because the funded percentage was 47.2%, and there were projected funding deficiencies starting at the end of the 2009-2010 plan year. The fund blamed the financial crisis of 2008 as the cause for the underfunding.

The fund said that contribution increases resulted in significant wage deferments by its active participants, and made it difficult for signatory contractors to remain competitive in the sheet metal construction market.

“At present, any would-be contributing employer is faced with participation in a plan that is projected to become insolvent, that imposes an almost punitive contribution rate, and for which new participants will accrue a 0% future benefit,” said the fund in its application.

Plasterers Local #82 Pension Plan

The Plasterers Local #82 Pension Plan of Portland, Oregon, which is projected to become insolvent during the 2034 plan year, has proposed reductions of 22% for participants who worked at least 400 hours in 2015 or 2016, and a 31% for participants who did not work at least 400 hours during the same period.

No suspensions can be made for participants and beneficiaries older than 80 as of the end of the month of the effective date of the suspension, which would be Feb. 28, 2019. The suspension is reduced for participants and beneficiaries above the age of 75, but younger than 80 as of the end of the month of the effective date of the suspension. The factor is calculated by determining how many months the participant or beneficiary has until age 80 (as of the end of the month of the effective date of the suspension) and dividing that amount by 60.

The plan was most recently 100% funded in 2008, however, investment losses from the stock market crash of 2008 caused the funding ratio to plunge to 68% the following year. Despite reductions to benefit accruals, and increases to contribution rates, the funding ratio continued to decline, falling to 47% as of 2017.

Pressroom Unions Pension Trust Fund

The New York City-based Pressroom Unions Pension Trust Fund is seeking the approval of a proposed benefit suspension equal to 39% of all plan benefits accrued through Sept. 30, 2017. The effective date would be Jan. 1, 2019, with no proposed expiration date. It said that the proposed suspension does not provide for different treatment of participants and beneficiaries, except when legally required; however, the accrual rate for active participants will not be reduced after Sept. 30, 2017.

The pension plan was certified to be in critical and declining status for the plan year beginning Oct. 1 2016, and is projected to become insolvent during the plan year beginning Oct. 1, 2031. As of Oct. 1, 2017, the plan had $164.4 million in liabilities, and $129.3 million in assets for a funded level of 78.7%.

Plasterers & Cement Masons Local 94 & Pension Fund

The Harrisburg, Pennsylvania-based Plasterers & Cement Masons Local 94 and Pension Fund is proposing that benefits of all plan participants will be reduced to 110% of the Pension Benefit Guaranty Corp. (PBGC) guarantee, which is the maximum benefits reduction allowed by law. As a monthly benefit amount, the PBGC guarantees a payment equal to 100% of the first $11 of the plan’s monthly benefit rate, plus 75% of the next $33 of the monthly benefit rate multiplied by the participant’s years of credited service.

The board of trustees said the fund is projected to become insolvent in the plan year beginning May 1, 2026, unless benefits are suspended. It also said the fund has seen a 44% decrease in the market value of assets from 2007 to 2017, and a 58% decrease in contribution hours when comparing the plan year beginning in 2007 to the average hours during the plan years 2008 through 2016.

Tags: Benefits Reductions, Pension, Plasterers & Cement Masons Local 94 & Pension Fund, Plasterers Local #82 Pension Plan, Pressroom Unions Pension Trust Fund, Sheet Metal Workers Local Pension Fund

Investments by the Washington State Investment Board in its home state totaled $2.4 billion at the end of the 12-month fiscal year on June 30, 2017, up 29.5% from the previous fiscal year, shows the board’s annual economically targeted investment report for the state plan that reported a funded ratio of 84% in it’s June 2017 annual report.

The report, scheduled to be discussed at the board’s April 19 meeting, provides annual data on how the board’s investments impact various economic sectors in Washington state, said board spokesman Chris Phillips. The $98.4 billion board runs the defined benefit pension plan programs for state employees.

The board, like many other public pension plans in the US, runs in-state investment programs, but regulations can vary as to what preference those investments take compared to out-of-state investments.

The $2.4 billion in-state investment is just a small segment of the board’s investment trust, but Phillips said the board must fulfill its fiduciary duty in seeking the best investments.

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“We don’t invest with any sort of up-front objective or mandate regarding in-state economic development,” he said in an emailed response to questions from CIO. “That’s not our mission. But we do want to provide information to show that a byproduct of our investment strategies is occurring in our home state. That’s a very important distinction since some public funds pursue an economic development agenda outright.”

The report attributes the largest increase in the asset value of Washington holdings to strong investment performance by Washington-based public companies in its portfolio. While the report doesn’t specifically name the companies, Washington-based companies like Amazon, Starbucks, and Microsoft all saw tremendous boosts in their stock prices during the 2016-2017 fiscal year that ran from July 1 to June 30.

“The value of public equities increased 57.5%; this was due primarily to the strong performance of many large Washington-based companies that are heavily represented in the passive indices, as well as additional investments by an active manager in several Washington-based companies,” the report said.

Washington-based public company stock held by the investment board totaled approximately $1 billion of the pension trust’s equity portfolio as of June 30, 2017, board statistics show. The total equity asset class totaled $35.5 billion.

Tangible assets saw the biggest increase among the board’s investment groups, 71% or $57.6 million, in the June 30, 2017, fiscal year. The report notes that several funds that are part of the board’s portfolio invested in Washington farmland in the fiscal year. The portfolio of Washington investments in the asset class totaled $80.8 million out of a total tangible assets portfolio of $3.4 billion.

The board’s in-state real estate portfolio increased by 15.1%, reflecting, according to the report, “a combination of acquisitions and dispositions, as well as increases and decreases in values at the property level. It also reflects, in some cases, reductions in the holdings size due to receipt of additional financing proceeds.”

Real estate assets invested in Washington totaled approximately $1 billion out of the $15.5 billion portfolio.

Two asset classes saw declines in their Washington investments between the two latest fiscal years.

Private equity saw the biggest drop, 9.6% between June 30, 2017, and June 30, 2016, year over year. The decrease was due to $14.5 million in Washington investments in the latest fiscal year compared with $26.7 million in the previous fiscal year, the report said

As of June 30, the report noted the board had $190.8 million invested in Washington-based companies in its private equity portfolio, representing approximately 1.6% of the total domestic private equity portfolio.

The report said that the Washington-based investments have been made in 42 different funds by 25 individual and general partners, four of which were regionally based in the Pacific Northwest.

It says investment staff continues to engage with officials on regional funds raising capital in the Pacific Northwest.

“Staff has performed due diligence on regional funds raising capital, although most of the fund sizes are smaller or the funds younger than those WSIB usually invests in directly,” the report said.

The fixed income asset class saw a small drop in Washington-state investments, the report noted, declining 2.9% as of June 30, 2017, from the previous fiscal year. Total in-state fixed income investments totaled $64.4 million of the $16.9 billion fixed income investments, the report said.

Phillips said investment officials would not be immediately available to discuss the report because it is yet to be formally presented before the board.

Tags: home state, investing, Private Equity, Washington state