On Monday, March 9th, the Trustees of the Oregon Retail Employees Pension Trust met with the Trust Actuary and Trust Attorney to discuss the current pension funding status. Under the Pension Protection Act of 2006, each plan year a multi-employer pension plan is certified as either critical status (red zone), endangered status, or neither (green zone). For 2008, the plan was certified as green zone.
The 2009 certification is due March 31, 2009. Because of investment market declines in 2008, the Pension Trust could be in critical status (red zone), or the Trustees could exercise an optional one year extension of the green zone status. If the plan is in critical status, the Trustees would need to develop, within a specified timeline, a rehabilitation plan to improve the Pension Plan's funding status. If the Trustees elect the one year green zone extension, we would still likely need to declare the plan to be critical in early 2010. With or without the extension of zone status, due to the large investment market declines in 2008, it is expected that changes will need to be made to pension contributions, or pension benefits, or both.
The Union Trustees believe that OREPT should be declared green zone for 2009. Extending the green zone has the following advantages:
1. Clear Rules – The administrative rules for the Pension Protection Act of 2006 are not yet written. This means that any changes the Trustees make now are made without a clear knowledge of the eventual guidance on rehabilitation plans. Once the rules are made, the OREPT will have to live with them and we will likely have to readjust again.
2. Investment Issues – The financial crisis in the United States has caused the problems we are now discussing. If over the next year things improve, the changes to the plan may be lessened. If we make changes now and things get worse, we will need to make changes again.
3. New Legislation – There is talk of new pension rules which may modify the Pension Protection Act of 2006 to allow for better options. If the Pension Plan is in critical status, the Trustees would need to make changes within a fixed timeline. Electing a one year extension of the green zone allows time to reflect potential future legislation.
It comes down to this: If we have to make changes, we might as well wait and make the right changes the first time.
On Monday, March 9th, Union Trustee Jeff Anderson made a motion that the OREPT actuary certify the plan green for 2009. Trustee Dan Clay seconded the motion. The Union Trustees voted for the motion and the Employer Trustees voted against the motion.
When a motion deadlocks at the Trust level, it is referred to arbitration. That process takes months. Unfortunately the deadline for the certification is March 31st. If no action is taken, OREPT will be certified as critical status for 2009.
Negotiations are set for Monday, March 16th and Tuesday, March 17th. At that time the bargaining parties will undoubtedly discuss pension issues.
As the situation develops, I will keep you informed.
Dan Clay
Union President
