UPS/IBT pension funding

Discussion in 'UPS Discussions' started by 35years, Feb 11, 2016.

  1. 35years

    35years Active Member

    No one reads the annual reports. However I did dig up this notice from last year:

    http://www.ibtupspensionfund.ups.com/content/UPS_IBT_AFN.pdf

    The reporting laws were changed in 2012 to make pensions look more fully funded than they are, and lower the amount companies had to contribute to look 100% funded.

    As of the last published report (December 31, 2014) the UPS/IBT fund had a Funding Shortfall of $1,095,788,642

    "As of December 31, 2014, the fair market value of the Plan’s assets was $4,994,575,825. On this same date, the Plan’s liabilities, determined using market rates, were $6,036,761,451."



    Under the old accounting rules the plan would have been only 78.6% funded.
    Under the new accounting rules the 1 trillion dollar shortfall = 103% funded

    Make no mistake, there was still a trillion dollar shortfall, the only thing that changed was the interest rate assumption.

    This decreased UPS's minimum contribution by $444,415,385 for 2014 alone.




    Something is rotten in the state of Denmark


     
    Last edited: Feb 11, 2016
  2. Indecisi0n

    Indecisi0n Well-Known Member

    Where is Denmark?
     
  3. 3 done 3 to go

    3 done 3 to go In control of my own destiny

    That's the loop hole Congress gave the unions in the omnibus bill
     
  4. Ms.PacMan

    Ms.PacMan Well-Known Member

    and yet there is a current thread that bashes the Post Office for being in the red because of an actual accounting of pension liabilities......
     
  5. 35years

    35years Active Member

    Sorry...

    The funding deficit is a Billion not a Trillion. To many zeros to keep straight. Anyway at the end of 2014 it was only 78% funded by the old accounting method. With the markets tanking, I wonder how underfunded it currently is.
     
  6. 35years

    35years Active Member

    Exactly.
    Did the contract spell out how 100% funded was to be determined?

    The fact that the fund was obligated to send us this notice (had to be underfunded by a very large amount) is concerning. Also the underfunded percentage jumped significantly using the established accounting method.

    A Billion is a lot of money to make up.
     
  7. 35years

    35years Active Member

    http://www.benefitspro.com/2013/09/05/map-21-the-wrong-course-for-pension-plans

    "The change was a godsend to companies experiencing cash flow issues, allowing them to redirect cash otherwise destined for higher pension fund contributions to fund other, more immediate needs. As a result, many companies responded to the MAP-21 rule by lowering their pension contributions for 2012, some by double-digit percentages.

    Pozen warned last year against companies relying too heavily on MAP-21 to solve their pension funding problems, saying that the 25-year averaging period went “too far,” and that somewhere in the neighborhood of five to 10 years would be more realistic.

    Earlier this year, Milliman warned that, should interest rates remain low, keeping discount rates low, the only options open to companies would be strong market returns or larger contributions. In other words, companies that have availed themselves of MAP-21 to reduce plan contributions may have bought themselves some time but aren’t really better off than before."
     
  8. Inthegame

    Inthegame Well-Known Member

    Good catch 35years. This Congress doesn't give Unions any "loopholes". This business friendly change applies to the funding of pensions which is derived from employer contributions. UPS can now assume an unrealistic 8.75% per year ROI over a 25yr projection to claim a 104% funding pct. Fortunately (for now) the funding formula also takes into account experience along with the age demographic and still requires the minimum funding necessary to fulfill the benefit obligation.

    It's a numbers game that frees up single employer plans from additional cash outlays. A few years back UPS lobbied for a scheme in which they could substitute assets for cash. See that airplane, there's your pension. (BTW Teamster DRIVE money fought that back for those of you who believe all DRIVE money goes to Democrats.) Anyway, the big danger here is it makes companies with large cash reserves (like UPS) more prone to pay off withdrawal liabilities from all multi-employer plans.

    So this is far from a bone thrown to unions unless you consider a bone full of rat poison to be tasty.