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Atlantic City Pension Plans

Atlantic City Pension Plans. Status of Merger March 12th, 2007. Current Pension Benefits. Two different plans with two different accrual formulas HEREIU Plan Schedule of benefits based on hourly contribution rate Frozen in 2004 Currently accruing $39 per month

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Atlantic City Pension Plans

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  1. Atlantic City Pension Plans Status of Merger March 12th, 2007

  2. Current Pension Benefits • Two different plans with two different accrual formulas • HEREIU Plan • Schedule of benefits based on hourly contribution rate • Frozen in 2004 • Currently accruing $39 per month • Pays most of the benefit for those in both plans • Local 54 Plan • Only around since 1999 • Benefit is 3.88% of total employer contribution for the year

  3. Funding Problems • HEREIU • Several events over the decades have contributed to financial problems in this Plan • Found actuarial mistake in early 90’s • Merger with New York Fund in mid-90’s • Federal Government 5 year vesting in 1999 • Stock market crash in 2000-2003 • Trustees took steps at each event, which started to improve matters until next event took place • Plan currently 39% Funded • Local 54 • No immediate funding problems • Weathered stock market crash since not many assets at the time • Concern that 3.88% multiplier will not be sustainable • If market crashes again this plan would be impacted and could implement cuts

  4. New Funding Law for Multi-Employer Plans • Designed in response to the recent pension funding crisis • Old rules focused on paying the minimum amount • New rules focus on improving the health of the plan as measured by its funding ratio • Defines Three Levels of Funded Plans • Healthy funding ratio exceeds 80% • Endangered funding ratio 65%- 80% • Critical funding ratio below 65% • Required Action for Critical Plans • Reporting to participants, IRS, etc. • Implementation and monitoring of recovery plans • Mandatory benefit reductions • 5%-10% surcharge on employer contributions

  5. HEREIU Projections

  6. Impact of Critical Status Determination • Every participant in the Plan will receive a notification that their pension plans is in critical status • Future benefit accruals will be reduced • It is likely that the maximum reductions under the law will be needed • This would drop the current $39 accrual to $16.16 • Cut back accrued • Plans in critical condition are allowed to roll back any increases that have not been in place for 5 years • This means that benefits already accrued may be reduced retroactively • Employer Contribution Surcharge • An immediate surcharge of 5%-10% would be levied on employer contributions • No benefit would be earned on this additional contribution

  7. Merger Option • UNITE has two large plans which are interested in merging with both the HEREIU and Local 54 Plans • They will not take HEREIU without the Local 54 Plan • National Retirement Fund • Traditionally garment industry • Has $1.6 billion in assets • Liability is 93% covered • Textile Fund • Distribution centers/industrial laundries • Has $351 million in assets • Liability is 97% covered

  8. History of Asset Returns

  9. Merger Implications • Plan would be in Healthy status • Combined assets of $2.3 billion • Accrued Benefits would be preserved on date of merger • Future accruals in HEREIU Plan must be reduced • Under UNITE actuarial assumptions, the $39.00 accrual is not sustainable • UNITE requires a portion of contributions to go towards paying off unfunded past service • Local 54 Plan benefit still at 3.88% of contributions • Benefit accruals will increase as bargained contribution rates go up

  10. Projected Funding Ratios of Each Plan

  11. HEREIU Participant Accruals in Merged Plan • Accrued benefits on date of merger would be preserved • Future accruals would be reduced from their current levels • Concern that current frozen Schedule A rates are not supportable • Requirement that a portion of employer contribution increases should go towards reducing unfunded liability during a ten-year phase-in period

  12. Local 54 Participant Accruals in Merged Plan • Accrued benefits on date of merger would be preserved • Future accruals would continue at their current rate of 3.88% of Contributions through 2015 • Ancillary benefit provisions will continue for current members

  13. Projection of Benefits Compare Historic Annual Benefit Accrual Rate to Projected Benefits Under the Merger Under Merger 1979 $9.00 1993 $9.00 2007 $60.57 1980 $9.00 1994 $9.00 2008 $62.17 1981 $9.00 1995 $12.00 2009 $63.77 1982 $9.00 1996 $12.00 2010 $65.37 1983 $9.00 1997 $12.00 2011 $66.97 1984 $9.00 1998 $12.00 2012 $68.57 1985 $9.00 1999 $33.46 2013 $70.17 1986 $9.00 2000 $34.48 2014 $71.77 1987 $9.00 2001 $45.97 2015 $73.37 1988 $9.00 2002 $52.46 2016 $94.05 1989 $9.00 2003 $59.97 2017 $94.95 1990 $9.00 2004 $67.92 2018 $94.95 1991 $9.00 2005 $73.92 2019 $94.95 1992 $9.00 2006 $73.92 2020 $94.95 14 yrs. $126.00 $508.10 $1,076.58

  14. Compare with other HEREIU Plans Plan Hourly Rate Accrual Atlantic City $1.27 $73.92 Las Vegas $0.57 $35.00 Cincinnati $0.36 $22.00 Minnesota $0.17 $9.00 Sacramento $0.22 $17.61 St. Louis $0.28 $30.00 Syracuse $0.22 $8.00 San Mateo $0.46 $12.20 Miami $0.22 $7.40 Monterey $0.31 $11.20 Anchorage $0.50 $28.55 Oakland $0.16 $5.70 Note: Information on these Plans was collected from old valuation reports and may not reflect current contribution rate or benefit accrual.

  15. Individual Examples

  16. Individual Examples

  17. Individual Examples

  18. Benefits of Merger • UNITE Plans gain • Growing active population • More assets to invest • Can achieve higher returns • HEREIU & Local 54 gain • Better stability • No funding problems • Eliminates need for Draconian cuts • Future increases in accrual rates • UNITE Trustees will not take HEREIU Plan without Local 54

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