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UPS subsidizing non ups pensions
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<blockquote data-quote="JonFrum" data-source="post: 123874"><p>The top three rules of investing are: Diversify, Diversify, Diversify. </p><p></p><p>Now let's compare Multi-employer pension funds to Single-employer pension funds. . . . </p><p></p><p>Both funds are insured by the "guarantees" of the nearly bankrupt Pension Benefit Guarantee Corporation, and both funds are run by trustees who may make or loose lots of money as they invest the fund's assets. There is almost no way to tell weather a particular fund's trustees will perform well or badly in their investment decisions. You can point to funds of both types that did badly, or that did well. It's unfair to compare a fund of one type, with a poor investment record, to a fund of the other type, with a good investment record, and claim the first type of fund is therefore inferior. Investing is risky business, and is a wildcard in pension fund analysis. Try to keep poor investment performance seperate from a comparative analysis of plan features. </p><p></p><p>Multi-employer funds have many contributing employers, about 3,500 in Central States, about 5,200 in the Western Conference fund. Single-employer funds are totally dependent on their one-and-only contributing employer. If it experances financial trouble, or goes bankrupt, so does the pension fund. Poof!</p><p></p><p>Multi-employer funds allow members to switch jobs amongst all their contributing employers, either voluntarily, or as the result of layoff, termination, bankruptcy, subcontracting, offshoring of work, etc. Single-employer funds, have you over a barrel. You can't switch employers because there is only one employer in the fund. You are also under heavy pressure to "behave" at all times especially when contemplating contract changes, strike pre-authorization votes, actual strikes, picket line activity, etc. If you are fired, or forced to quit through a campaign of harrassment or pressure, you are not just out of a job, your pension is frozen at the current level. You probable wern't coincidently at the end of your career with your retirement papers in hand ready for submission, so you must settle for whatever the rules of the fund gives you based on your premature withdrawal from the fund. If you were not vested, you loose all your contributions. They are concidered abandoned and are the property of the fund. If you were vested, you must wait until you are of adequate age to collect a pension, either Early Retirement at 55 or so, or Normal Retirement Age at 65 or so. The pension will be smaller than had you worked a full career, and the fixed dollar amount may have been stagnant for years, so it won't buy as much when you get it as when it was first calculated. (This is also true of Multi-employer funds when a participant stops working prematurely, and doesn't get a new job with another contributing employer.) </p><p></p><p>Multi-employer funds have Recprocity Agreements with many other funds so you can continue building Pension Credit as you move from one employer to another who is outside the original fund, but covered by a fund with a reciprocal agreement . Single-employer funds may well not have this feature. (If any one knows the policy of UPS on this or other pension matters, please post it.) </p><p></p><p>Multi-employer funds normally invest in a broad mix of stocks, bonds, real estate, etc., Single-employer funds may try to prop-up the value of the single employer's stock by loading up on that stock. Often the company also encourages employees to own its own stock, offering discounts on purchases as an incentive. UPS goes further than most, in expecting more levels of management to buy and hold UPS stock. This is a violation of the Diversify-Your-Investments Principle and also creates a somewhat artificial demand for the stock. At least until those who bought stock then eventually all start selling. </p><p></p><p>Multi-employer funds are charged a lot less in insurance premiums by the PBGC, and have much lower coverage than single-employer funds because many, including the PBGC and Congress, but not Tieguy, recognizes that they, in effect, have their insurance built in to their very structure. Insurance is the spreading of risk. Multi-employer funds already spread their risk by having many contributing employers. Some Multi-employer funds have diverse employers but within a single industry. Others, like the Teamsters funds, are even further diversified by having employers in multiple industries. The more diversity the better, and the safer. The large Teamster funds are so diversified in this regard that they almost mimic a smaller version of the US economy itself. But if the entire economy collapses, say, from some action by terrorists, then, yes, the Teamsters funds will collapse right along with it. That's life. There are some risks you can't avoid. In investing there's a great deal of risk in owning a single stock; less risk in owning several diferent stocks; a lot less risk in investing in the S&P 500; and even less risk in investing in a portfolio of several different index funds. </p><p></p><p>Single-employer funds are better insured because they fail at 100 times the rate of multi-emplorer funds and so they have scared politicians to act to avoid panic. They need the safety net because they have such a bad track record. Their bad track record, in turn has caused a crisis in the PBGC which is in financial trouble itself but can only get out of the woods by raising money. To do that it has to raise premiums on single-employer funds even further, something the funds don't want to pay. The PBGC is stuck between a rock and a hard place. Single-employer funds pay a higher benefit when they go belly-up and are taken over by the PBGC, but this lone desirable feature only comes into play when your plan goes bankrupt! It's like someone bragging that they have average volcano insurance. OK. But the down side is you have to have molten lava flowing through your living room. Who wants that? Tieguy is focusing on a catastrophy and noting, correctly, that you would be better off in a single-employer fund on that one day. I agree. But you shouldn't knowingly be in a fund (of either type) that you expect will actually fail. Just as you should not live at the foot of an active volcano. The authorities may even forbid it. Calamities should be largely unexpected. That's what insurance is for. Not for dangers that are known and ready to occur. It's the many features of pension plans under normal circumstances that we need to base our judgements on, not the one feature that applies only when disaster strikes. Besides, even the single-employer insurance payouts by the PBGC cut your monthly benefit, just not as much as the multi-employer payouts. Basically, Tieguy is asking us to leave a very large, safe, (but not pretty) boat with inadequate insurance, and step into a small craft (I'm not sure if it's pretty or not), because the small craft has mediocre insurance that only applies, of course, if we capsize and sink. </p><p></p><p>[Continued below . . . ]</p></blockquote><p></p>
[QUOTE="JonFrum, post: 123874"] The top three rules of investing are: Diversify, Diversify, Diversify. Now let's compare Multi-employer pension funds to Single-employer pension funds. . . . Both funds are insured by the "guarantees" of the nearly bankrupt Pension Benefit Guarantee Corporation, and both funds are run by trustees who may make or loose lots of money as they invest the fund's assets. There is almost no way to tell weather a particular fund's trustees will perform well or badly in their investment decisions. You can point to funds of both types that did badly, or that did well. It's unfair to compare a fund of one type, with a poor investment record, to a fund of the other type, with a good investment record, and claim the first type of fund is therefore inferior. Investing is risky business, and is a wildcard in pension fund analysis. Try to keep poor investment performance seperate from a comparative analysis of plan features. Multi-employer funds have many contributing employers, about 3,500 in Central States, about 5,200 in the Western Conference fund. Single-employer funds are totally dependent on their one-and-only contributing employer. If it experances financial trouble, or goes bankrupt, so does the pension fund. Poof! Multi-employer funds allow members to switch jobs amongst all their contributing employers, either voluntarily, or as the result of layoff, termination, bankruptcy, subcontracting, offshoring of work, etc. Single-employer funds, have you over a barrel. You can't switch employers because there is only one employer in the fund. You are also under heavy pressure to "behave" at all times especially when contemplating contract changes, strike pre-authorization votes, actual strikes, picket line activity, etc. If you are fired, or forced to quit through a campaign of harrassment or pressure, you are not just out of a job, your pension is frozen at the current level. You probable wern't coincidently at the end of your career with your retirement papers in hand ready for submission, so you must settle for whatever the rules of the fund gives you based on your premature withdrawal from the fund. If you were not vested, you loose all your contributions. They are concidered abandoned and are the property of the fund. If you were vested, you must wait until you are of adequate age to collect a pension, either Early Retirement at 55 or so, or Normal Retirement Age at 65 or so. The pension will be smaller than had you worked a full career, and the fixed dollar amount may have been stagnant for years, so it won't buy as much when you get it as when it was first calculated. (This is also true of Multi-employer funds when a participant stops working prematurely, and doesn't get a new job with another contributing employer.) Multi-employer funds have Recprocity Agreements with many other funds so you can continue building Pension Credit as you move from one employer to another who is outside the original fund, but covered by a fund with a reciprocal agreement . Single-employer funds may well not have this feature. (If any one knows the policy of UPS on this or other pension matters, please post it.) Multi-employer funds normally invest in a broad mix of stocks, bonds, real estate, etc., Single-employer funds may try to prop-up the value of the single employer's stock by loading up on that stock. Often the company also encourages employees to own its own stock, offering discounts on purchases as an incentive. UPS goes further than most, in expecting more levels of management to buy and hold UPS stock. This is a violation of the Diversify-Your-Investments Principle and also creates a somewhat artificial demand for the stock. At least until those who bought stock then eventually all start selling. Multi-employer funds are charged a lot less in insurance premiums by the PBGC, and have much lower coverage than single-employer funds because many, including the PBGC and Congress, but not Tieguy, recognizes that they, in effect, have their insurance built in to their very structure. Insurance is the spreading of risk. Multi-employer funds already spread their risk by having many contributing employers. Some Multi-employer funds have diverse employers but within a single industry. Others, like the Teamsters funds, are even further diversified by having employers in multiple industries. The more diversity the better, and the safer. The large Teamster funds are so diversified in this regard that they almost mimic a smaller version of the US economy itself. But if the entire economy collapses, say, from some action by terrorists, then, yes, the Teamsters funds will collapse right along with it. That's life. There are some risks you can't avoid. In investing there's a great deal of risk in owning a single stock; less risk in owning several diferent stocks; a lot less risk in investing in the S&P 500; and even less risk in investing in a portfolio of several different index funds. Single-employer funds are better insured because they fail at 100 times the rate of multi-emplorer funds and so they have scared politicians to act to avoid panic. They need the safety net because they have such a bad track record. Their bad track record, in turn has caused a crisis in the PBGC which is in financial trouble itself but can only get out of the woods by raising money. To do that it has to raise premiums on single-employer funds even further, something the funds don't want to pay. The PBGC is stuck between a rock and a hard place. Single-employer funds pay a higher benefit when they go belly-up and are taken over by the PBGC, but this lone desirable feature only comes into play when your plan goes bankrupt! It's like someone bragging that they have average volcano insurance. OK. But the down side is you have to have molten lava flowing through your living room. Who wants that? Tieguy is focusing on a catastrophy and noting, correctly, that you would be better off in a single-employer fund on that one day. I agree. But you shouldn't knowingly be in a fund (of either type) that you expect will actually fail. Just as you should not live at the foot of an active volcano. The authorities may even forbid it. Calamities should be largely unexpected. That's what insurance is for. Not for dangers that are known and ready to occur. It's the many features of pension plans under normal circumstances that we need to base our judgements on, not the one feature that applies only when disaster strikes. Besides, even the single-employer insurance payouts by the PBGC cut your monthly benefit, just not as much as the multi-employer payouts. Basically, Tieguy is asking us to leave a very large, safe, (but not pretty) boat with inadequate insurance, and step into a small craft (I'm not sure if it's pretty or not), because the small craft has mediocre insurance that only applies, of course, if we capsize and sink. [Continued below . . . ] [/QUOTE]
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