. . .does anyone know the real reason these pension funds become so underfunded? . . .
Lots of reasons, Brett636.
First, nearly all pension funds are squeezed, not just Teamsters funds. There is a general lack of sound financial understanding and reasoning on the part of most people that has led to problems throught our economy.
The funds were counting on healthy investment returns, and instead they got three years of market stagnation and loss.
The funds are largely ignored by most "participants" until they have about twenty years or more invested.
The funds are governed by a board of trustees that is half Management and half Labor, which, while seemingly fair and balanced, is also a recipe for disagreement and stalemate.
Because the trustees design and run the fund, they have wide latitude in making decisions. They don't have to be right, or fair. They just have to avoid being found unreasonable or arbitrary.
Trustees may vote higher benefit levels than the plan's asset pool can support. Often, this is what many want them to do.
Loose accounting rules. Though the rules have finally been tightened up. (The tightening itself has made the near-term problem worse!)
Costs are "amortized" which lets the plans fund expenses over 15 or so years, a little at a time. This tends to allow known expenses to build up, and create a worse situation when the stock market takes one of its inevitable dips.
The laws that govern the funds, are written by Labor and Management as they exert their influence in the political process. Like all regulatory law created by committee, it is almost impossible to have tough laws with teeth. Mostly, laws are a compromise, so that no party is so offended that they take their votes and political contributions and go home.
The funds have 210 days after their plan year ends to file their Form 5500s. It takes more time for the forms to become public. Some of the information in the Forms is from the begining of the plan year, making it even older. You would need several prior year form 5500s as well to know the history of the fund's situation.
The Summary Annual Report the funds send you is only a page or two. The version available on Welcome to freeErisa.com! is much longer, but still not complete, although it is free. The copying cost of the full Annual Report available from the Dept. of Labor or the plans themselves, will discourage many from getting their own copy.
Many think, as I did until recently, that a fund is fully funded if it is funded at 100%. Unfortunately, there are so many things that can go wrong, that a fund should plan for a rainy day(s) by "overfunding" to 110 or 120% or more.
Some believe it is actually desirable to underfund a plan. This guarantees future problems.
There is expensive duplication of effort when we are all split up into numerous regional funds. If all Teamsters were consolidated into one fund we would achieve a great savings. Even more so if the consolidation went beyond the Teamsters to include as many others as possible. The Teamsters Health & Welfare funds are many times more fragmented than even the pension funds.
The funds pay out a great deal of money to investment advisors as if they are buying expertise. They really shouldn't need all that advice. They should have their own opinions. Pension funds are supose to invest prudently, so risky investments are off limits. It shouldn't be that hard for a competent trustee to know how to invest in safe investments like government bonds and money market funds and the major market indexes. What on earth are they buying with all the millions they pay in consulting fees? Basically, the stock market, will either go up, go down, or stay about the same. You have a 1/3 chance of being right just by guessing. You have a much better chance of being right if you read the financial newspapers, magazines, watch the news, and listen to the radio, especially since (hint, hint) the very long term trend is always up, anyway.
The funds pay out consulting fees to people even when their advice lost money. Mostly I think the trustees are establishing a paper trail to demonstrate that if things go bad, hey, they were just acting on the advice of experts.
The law normally prevents funds from cutting benefits for current retirees and the rest of us who have earned vested benefits to date. So funds must concentrate all their cutting on future benefit accruals, thus magnifing the pain to those of us effected.
No one provides sufficient information to keep us informed of our pension fund situation. The government, the Teamsters, UPS, TDU, several pension improvement committees, several pension reform websites, and the funds, themselves, all do a little, but not nearly enough.
The amount of misinformation in circulation is shocking. I'm trying to fix that a bit, but I'm just one guy, and I already have a full-time job. What is needed is for TDU and the various Pension Reform Committees to unite into one general committee and tackle all the pension plans(and H&W plans) simultaneously. The piecemeal approach just doesn't work.
The funds and their policies are largely beyond our control. We are the members, but only in a technical sense. The funds are created by the Teamsters Union and the trustees are appointed by Teamsters officials and management groups. Typically, the funds were in existence before we were hired (or born?) so we are just along for the ride. There is no actual process to approve or disaprove of the fund's various policies. Usually, the only discussion about the pension is at contract time and only concerns the level of hourly contributions, and this is mostly decided by Teamsters negotiators. Although the pension mess may be a bigger issue in contract talks this time around, it still is only one article among many in the contract. We need to address the pension issue in all its facets sometime when it alone is up for discussion.
In short, when it comes to pension funds, (and H&W funds) we live in the worst of all possible worlds, and many people have deliberately worked very hard over these many years to make and keep these difficult situations, just the way they are.
