Home
Forums
New posts
Search forums
What's new
New posts
Latest activity
Members
Current visitors
Log in
Register
What's new
Search
Search
Search titles only
By:
New posts
Search forums
Menu
Log in
Register
Install the app
Install
Home
Forums
Brown Cafe UPS Forum
UPS Retirement Topics
UPS subsidizing non ups pensions
JavaScript is disabled. For a better experience, please enable JavaScript in your browser before proceeding.
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an
alternative browser
.
Reply to thread
Message
<blockquote data-quote="JonFrum" data-source="post: 148748"><p>. . . Continued</p><p>Many keep repeating the mantra that 60% of UPS contributions go to subsidize the retirement of non-UPSers. If true, this would be a huge story. And would trigger multiple charges and lawsuits, both criminal and civil. It also makes one wonder why UPS has been allowing this subsidy to drain their coffers every year since the 1950s. And why participants haven't filed charges with the Labor Department, the Attorney General, the FBI, the Internal review Board (IRB), their Joint Council, the General Executive Board (GEB), their respective state officials, or even their local police department. If UPS contributes, say, a billion dollars a year, on average, to the various pension funds, then they have contributed about $10 billion dollars in just the last ten years, (a very, very rough estimate.) If 60% is misdirected to non-UPSers, that's $6 billion. But no one is willing to explain how this is being done. No details, no proof, just endless repetition of the mantra. If $6 billion (just in the last ten years) were being stolen / skimmed / redirected / misappropriated / swindled / kited / embezeled / mismanaged / squandered / defrauded / misspent / kicked back / extorted / quid-pro-quo'd or whatever, don't you think UPS or someone would do more than just gripe? </p><p></p><p>UPS has been a member of these funds from their creation in the 1950s. The funds are jointly governed by a Board of Trustees composed of equal numbers of Union and Employer representatives. UPS ratifies the plans themselves and the selection of all Employer Trustees, and all decisions and actions they take, past and future. UPS has access to a variety of public information about the plans and their status (as do we all), in addition to information they are entitled to as a contributing employer. As the largest employer, I imagine they could get anything they want. They have tremendous clout. Do you really think UPS just lets all that money slip through their hands?</p><p></p><p>But what I've finally figured out is that when a plan is 100% funded, it's still not truely financially sound! Funds need to be "overfunded" maybe to the point of 130 or 140%. I, like everyone, originally assumed that 100% was the gold standard. Such a fund was "fully funded" and therefore had enough money on hand today to pay all it's future obligations. The fund's current assets were sufficient to pay for all vested benefits that had been earned to date. This naieve view is based on the idea that 100% represents the sum total of everything under consideration. If you take an apple pie and slice it in halves or thirds or quarters, you are taking the original pie (100%) and dividing it into 50%, or 33.3% or 25% portions. But 100% is the total pie. You can't have more than 100%, no matter how you slice it. Likewise, the most you can get on a test in school is 100%. There is nothing above and beyond getting every question right. 100% is the highest score.</p><p></p><p>But finances are different. Especially long-term finances, the kind you need an actuary to keep track of. You can always use more money. You can always use more insurance. So when a pension plan is 100% funded, which very few are, they are only "out of the woods" if everything continues to go perfectly. In fact, pension plan funding percentages are based on a variety of actuarial assumptions. Each assumption may be wrong, or maybe several assumptions may be wrong. Every year the plans re-evaluate their assumptions and see if they are still appropriate and if last year's educated guesses proved to be correct or just plain wrong. Plans make assumptions about how many participants will get vested, or retire, or die, or become disabled, or laid off, etc. They assume the fund's invested assets will make a certain return, (say, 8%), and that a certain number of companies will go out of business, and that other companies will join the fund, and so forth. Imagine that you expected to earn 8% but instead lost 8%! That means you're suddenly 16% short of your expectation. Now imagine you lost money several years in a row. Your fund is now in crisis. This is why I believe a fund must be "overfunded" by as much as possible. You just never know what calamities will strike. Financial losses in the stock market are particularly devastating because they represent a double hit. First you loose the 8%, or so, you counted on earning, then you loose the 8% you actually lost. After several years of losses, the fund is so depleated that even healthy investment returns won't soon make up for the string of losses because the current sum invested is now so much smaller. Lots of funds that were overfunded in the late 1990s are seriously underfunded today. They were counting on continued healthy investment returns, and they got investment losses. The 100% funding level should not be thought of as a maximum, it's really just an average. It's not the highest point on the funding scale, it's just a point on a scale that goes up as high as you would like. It's like deciding how much insurance to buy. No matter how much you buy, you could always buy more. It's a judgement call.</p><p></p><p>Oddly enough, some people wrongly view 100% funding as actually too high a funding level. They say 90% or 80% is fine. The rest of the money gap will be made up in high investment returns (they assume). Besides, an underfunded pension plan means any employer seeking to withdraw must pay a Withdrawal Liability penalty. This often discourages a disgruntled employer from following through on his plans to withdraw. Such people believe trapping employers in the funds strengthens the funds. </p><p></p><p>I began to realize how even a 100% funded plan is not as sound as everyone claims when I noticed the Western Conference plan made major cuts even though they were 93% funded (according to Moody's) and 100% funded according to others. (There are various ways to calculate the funding ratio, and that is yet another uncertainty to consider, and yet another reason to opt for the highest funding ratio attainable.) Then I noticed the Machinist's union pension fund, which some of our mechanics are in, was 124% funded, and even they made cuts. This made me realize that funds that appear to be well funded, or even substancially "overfunded," may still have funding problems. Usually, these funds have funding deficiencies in the out-years that actuarial analysis has uncovered. They may appear fine currently, but will experience funding problems in the future, perhaps as a result of an unusually large number of participants expected to retire, for example. </p><p></p><p>So when you see that Moody's rates various funds as being funded at 57%, 58%, 59% etc., they are comparing that to a 100% standard. But you should consider even the 100% level as only mediocre, like getting a B-minus in school. These funds may appear to have less than 60 cents on the dollar available to meet promised future benefit obligations, but that's the (relatively) good news! In fact, the funds are vunerable to a variety of factors that may change for the worse. We all need to stop being optimistic when it comes to making actuarial assumptions about the pension plans we're in. This optimistic attitude has resulted in a huge National Debt, huge problems in Social Security, huge problems in State pension plans, and huge problems in private pension plans, both single-employer and multi-employer.</p></blockquote><p></p>
[QUOTE="JonFrum, post: 148748"] . . . Continued Many keep repeating the mantra that 60% of UPS contributions go to subsidize the retirement of non-UPSers. If true, this would be a huge story. And would trigger multiple charges and lawsuits, both criminal and civil. It also makes one wonder why UPS has been allowing this subsidy to drain their coffers every year since the 1950s. And why participants haven't filed charges with the Labor Department, the Attorney General, the FBI, the Internal review Board (IRB), their Joint Council, the General Executive Board (GEB), their respective state officials, or even their local police department. If UPS contributes, say, a billion dollars a year, on average, to the various pension funds, then they have contributed about $10 billion dollars in just the last ten years, (a very, very rough estimate.) If 60% is misdirected to non-UPSers, that's $6 billion. But no one is willing to explain how this is being done. No details, no proof, just endless repetition of the mantra. If $6 billion (just in the last ten years) were being stolen / skimmed / redirected / misappropriated / swindled / kited / embezeled / mismanaged / squandered / defrauded / misspent / kicked back / extorted / quid-pro-quo'd or whatever, don't you think UPS or someone would do more than just gripe? UPS has been a member of these funds from their creation in the 1950s. The funds are jointly governed by a Board of Trustees composed of equal numbers of Union and Employer representatives. UPS ratifies the plans themselves and the selection of all Employer Trustees, and all decisions and actions they take, past and future. UPS has access to a variety of public information about the plans and their status (as do we all), in addition to information they are entitled to as a contributing employer. As the largest employer, I imagine they could get anything they want. They have tremendous clout. Do you really think UPS just lets all that money slip through their hands? But what I've finally figured out is that when a plan is 100% funded, it's still not truely financially sound! Funds need to be "overfunded" maybe to the point of 130 or 140%. I, like everyone, originally assumed that 100% was the gold standard. Such a fund was "fully funded" and therefore had enough money on hand today to pay all it's future obligations. The fund's current assets were sufficient to pay for all vested benefits that had been earned to date. This naieve view is based on the idea that 100% represents the sum total of everything under consideration. If you take an apple pie and slice it in halves or thirds or quarters, you are taking the original pie (100%) and dividing it into 50%, or 33.3% or 25% portions. But 100% is the total pie. You can't have more than 100%, no matter how you slice it. Likewise, the most you can get on a test in school is 100%. There is nothing above and beyond getting every question right. 100% is the highest score. But finances are different. Especially long-term finances, the kind you need an actuary to keep track of. You can always use more money. You can always use more insurance. So when a pension plan is 100% funded, which very few are, they are only "out of the woods" if everything continues to go perfectly. In fact, pension plan funding percentages are based on a variety of actuarial assumptions. Each assumption may be wrong, or maybe several assumptions may be wrong. Every year the plans re-evaluate their assumptions and see if they are still appropriate and if last year's educated guesses proved to be correct or just plain wrong. Plans make assumptions about how many participants will get vested, or retire, or die, or become disabled, or laid off, etc. They assume the fund's invested assets will make a certain return, (say, 8%), and that a certain number of companies will go out of business, and that other companies will join the fund, and so forth. Imagine that you expected to earn 8% but instead lost 8%! That means you're suddenly 16% short of your expectation. Now imagine you lost money several years in a row. Your fund is now in crisis. This is why I believe a fund must be "overfunded" by as much as possible. You just never know what calamities will strike. Financial losses in the stock market are particularly devastating because they represent a double hit. First you loose the 8%, or so, you counted on earning, then you loose the 8% you actually lost. After several years of losses, the fund is so depleated that even healthy investment returns won't soon make up for the string of losses because the current sum invested is now so much smaller. Lots of funds that were overfunded in the late 1990s are seriously underfunded today. They were counting on continued healthy investment returns, and they got investment losses. The 100% funding level should not be thought of as a maximum, it's really just an average. It's not the highest point on the funding scale, it's just a point on a scale that goes up as high as you would like. It's like deciding how much insurance to buy. No matter how much you buy, you could always buy more. It's a judgement call. Oddly enough, some people wrongly view 100% funding as actually too high a funding level. They say 90% or 80% is fine. The rest of the money gap will be made up in high investment returns (they assume). Besides, an underfunded pension plan means any employer seeking to withdraw must pay a Withdrawal Liability penalty. This often discourages a disgruntled employer from following through on his plans to withdraw. Such people believe trapping employers in the funds strengthens the funds. I began to realize how even a 100% funded plan is not as sound as everyone claims when I noticed the Western Conference plan made major cuts even though they were 93% funded (according to Moody's) and 100% funded according to others. (There are various ways to calculate the funding ratio, and that is yet another uncertainty to consider, and yet another reason to opt for the highest funding ratio attainable.) Then I noticed the Machinist's union pension fund, which some of our mechanics are in, was 124% funded, and even they made cuts. This made me realize that funds that appear to be well funded, or even substancially "overfunded," may still have funding problems. Usually, these funds have funding deficiencies in the out-years that actuarial analysis has uncovered. They may appear fine currently, but will experience funding problems in the future, perhaps as a result of an unusually large number of participants expected to retire, for example. So when you see that Moody's rates various funds as being funded at 57%, 58%, 59% etc., they are comparing that to a 100% standard. But you should consider even the 100% level as only mediocre, like getting a B-minus in school. These funds may appear to have less than 60 cents on the dollar available to meet promised future benefit obligations, but that's the (relatively) good news! In fact, the funds are vunerable to a variety of factors that may change for the worse. We all need to stop being optimistic when it comes to making actuarial assumptions about the pension plans we're in. This optimistic attitude has resulted in a huge National Debt, huge problems in Social Security, huge problems in State pension plans, and huge problems in private pension plans, both single-employer and multi-employer. [/QUOTE]
Insert quotes…
Verification
Post reply
Home
Forums
Brown Cafe UPS Forum
UPS Retirement Topics
UPS subsidizing non ups pensions
Top