Last year was very much a disaster for the U.S. economy. Millions of jobs were eliminated and the stock market lost over $4 trillion—or about 38% of the nation’s market value.
The Oregon Retail Employees Pension Trust Fund (OREPT) did not escape the financial collapse. While the OREPT’s investment strategy is diversified and balanced, this past year the plan showed a 26% loss. The combination of the financial crisis and the current recession has produced the worst economic market conditions in over 70 years.
The union office has received numerous phone calls from the membership regarding pensions. With the many questions in these difficult times, I feel the membership needs a better understanding of the path your OREPT Trustees must follow to ensure the safety of your pension benefits. Whether good or bad, the path your pension Trustees must take is largely set by the Pension Protection Act of 2006.
The first law which governs the OREPT is the Taft-Hartley Act passed in 1947. Because your OREPT is a Taft-Hartley fund there are 10 trustees; five from the Union and five from the Employers.
Your OREPT is insured through the Pension Benefit Guarantee Corporation (PBGC), which is a quasi-governmental insurance fund. The PBGC is funded by premiums from funds across the country. More information on the PBGC can be found at www.pbgc.gov.
The OREPT must also remain in compliance with rules put forward by the Department of Labor, as well as other federal laws such as the Equal Retirement Income Security Act and the Pension Protection Act (PPA).
The PPA passed by Congress in 2006 requires all pension funds insured by the PBGC to report funding level status to the government. Funding level status is calculated by comparing the fund’s assets to its liabilities and by calculating the influx and output of funds on a yearly basis. This reporting system requires a designation of color flag status. The color status of the fund is set up by the PPA to easily show participants the general health of their retirement fund. The color system is as follows: Green means the fund is in good shape, yellow means the fund is threatened, and red means the fund is critical.
At the end of 2008, about 75% of U.S.-based defined benefit pension plans were declared to be in “red” status.
The Federal Government passed the Worker, Retiree and Employer Recovery Act of 2008, which provided a one-year option to renew the “green” status of a plan and avoid or delay “red” status and the changes that come with that designation.
Let’s review the options the Trustees face along with some personal observations:
If the Trustees elect to do so, or if they cannot agree on a course of action and deadlock, the plan will be declared “red” or threatened. The “red” status forces a default schedule of benefit cuts as well as increased contributions from the Employer until the matter can be resolved through bargaining. This is very tricky as current funding levels would require either massive infusions of new money into the trust or substantial reductions in adjustable benefits. It is also possible that a combination of both might occur. Examples of adjustable benefits may be early retirement benefits, cost-of-living adjustments, and disability benefits. The OREPT attorney will determine what benefits are considered adjustable and are therefore subject to revision. As of printing, this matter is not yet settled. Default schedules are currently being prepared as required by the PPA should the parties decide to elect to go “red,” or if a deadlock occurs.
The Trustees could agree to declare the plan “green” for 2009 because the plan was green in January of 2008. This option would almost certainly still require the Trustees to negotiate adjustable benefit reductions and additional contributions, but the action would be delayed for a year. If funding did not improve over the year, the trust could be in even worse trouble, requiring deeper, more dramatic cuts.
Either of these options will have a dramatic effect on your pension system. The one silver lining in this article is that your accrued benefits cannot be reduced and are insured by the PBGC.
This article is not an official notice or a promise of benefits. I am not in a position to offer anyone personal advice. This article is simply a collection of the facts as I understand them in an effort to keep Local 555 members better informed about the difficulties facing pensions.
Many difficult decisions must be made, but remain assured that protecting your retirement is our first priority. Local 555 cannot give you personal financial advice, however if you have questions about ongoing developments check out website: www.ufcw555.com. Other questions may be directed to Steve Konopa, Local 555 Staff Director at: 503-598-6363.
The Oregon Retail Employees Pension Trust Fund (OREPT) did not escape the financial collapse. While the OREPT’s investment strategy is diversified and balanced, this past year the plan showed a 26% loss. The combination of the financial crisis and the current recession has produced the worst economic market conditions in over 70 years.
The union office has received numerous phone calls from the membership regarding pensions. With the many questions in these difficult times, I feel the membership needs a better understanding of the path your OREPT Trustees must follow to ensure the safety of your pension benefits. Whether good or bad, the path your pension Trustees must take is largely set by the Pension Protection Act of 2006.
The first law which governs the OREPT is the Taft-Hartley Act passed in 1947. Because your OREPT is a Taft-Hartley fund there are 10 trustees; five from the Union and five from the Employers.
Your OREPT is insured through the Pension Benefit Guarantee Corporation (PBGC), which is a quasi-governmental insurance fund. The PBGC is funded by premiums from funds across the country. More information on the PBGC can be found at www.pbgc.gov.
The OREPT must also remain in compliance with rules put forward by the Department of Labor, as well as other federal laws such as the Equal Retirement Income Security Act and the Pension Protection Act (PPA).
The PPA passed by Congress in 2006 requires all pension funds insured by the PBGC to report funding level status to the government. Funding level status is calculated by comparing the fund’s assets to its liabilities and by calculating the influx and output of funds on a yearly basis. This reporting system requires a designation of color flag status. The color status of the fund is set up by the PPA to easily show participants the general health of their retirement fund. The color system is as follows: Green means the fund is in good shape, yellow means the fund is threatened, and red means the fund is critical.
At the end of 2008, about 75% of U.S.-based defined benefit pension plans were declared to be in “red” status.
The Federal Government passed the Worker, Retiree and Employer Recovery Act of 2008, which provided a one-year option to renew the “green” status of a plan and avoid or delay “red” status and the changes that come with that designation.
Let’s review the options the Trustees face along with some personal observations:
If the Trustees elect to do so, or if they cannot agree on a course of action and deadlock, the plan will be declared “red” or threatened. The “red” status forces a default schedule of benefit cuts as well as increased contributions from the Employer until the matter can be resolved through bargaining. This is very tricky as current funding levels would require either massive infusions of new money into the trust or substantial reductions in adjustable benefits. It is also possible that a combination of both might occur. Examples of adjustable benefits may be early retirement benefits, cost-of-living adjustments, and disability benefits. The OREPT attorney will determine what benefits are considered adjustable and are therefore subject to revision. As of printing, this matter is not yet settled. Default schedules are currently being prepared as required by the PPA should the parties decide to elect to go “red,” or if a deadlock occurs.
The Trustees could agree to declare the plan “green” for 2009 because the plan was green in January of 2008. This option would almost certainly still require the Trustees to negotiate adjustable benefit reductions and additional contributions, but the action would be delayed for a year. If funding did not improve over the year, the trust could be in even worse trouble, requiring deeper, more dramatic cuts.
Either of these options will have a dramatic effect on your pension system. The one silver lining in this article is that your accrued benefits cannot be reduced and are insured by the PBGC.
This article is not an official notice or a promise of benefits. I am not in a position to offer anyone personal advice. This article is simply a collection of the facts as I understand them in an effort to keep Local 555 members better informed about the difficulties facing pensions.
Many difficult decisions must be made, but remain assured that protecting your retirement is our first priority. Local 555 cannot give you personal financial advice, however if you have questions about ongoing developments check out website: www.ufcw555.com. Other questions may be directed to Steve Konopa, Local 555 Staff Director at: 503-598-6363.
