Is Central States pension fund ready to go under?

[JonFrum]

This would appear to highlight the point we have always made that ups is the biggest contributer to the plan. If net assets end up at 21 billion by the end of this year as predicted then we are approximately 12 billion shy of 100 percent. Why then would ups be obligated for half of that amount if as you say there are so many other companies feeding the fund.

I don't know if UPS' Withdrawal Liability figure is half the Plan's total Unfunded Vested Liability, or not. I do know the formula for calculating Withdrawal Liability is given in ERISA and in the Plan Document, itself. The calculation is complex, but fairly straightforeward. There is a little room for negotiation about actuarial assumptions, but not much.

UPS has the largest number of covered employees, even more so, now that Consolidated Freightways went bankrupt.

UPS (I assume) contributes at the highest hourly rate, and probably has always done so, or if not, then close to it.

UPS has been a long-time Contributing Employer of the Fund, and thus is responsible for the full range of past years included in the Formula's calculations.

UPS is among the *surviving* Employers. Bankrupt Employers and Withdrawn Employers, and a few others who were exempt from the Withdrawal Liability obligation, are out of the picture.

The combination of UPS having the most employees, the highest hourly contribution rates, and the longest contribution history, make it a major factor in Central States. Finally, UPS is contemplating withdrawing from the Fund at the worst possible time, when the Fund has been seriously underfunded. Had they instead chose to exit the Western Conference of Teamsters Fund, for example, their cost would be zero, instead of $6 billion!

So what is your final answer. stay with CS?
I don't have a final answer. As I've said all along, if UPS exits, all past contributions up to that point, probably stay put in the Fund.

To leave, (from that point on,) there must be an alternative. I don't know much about the UPS proposal for a Teamsters/UPS plan, because UPS refuses to release the details.

I don't know much about the APWA alternative because the APWA refuses to release the details.

And I don't know much about what alternatives the posters on Browncafe are proposing, because they mostly just criticize Central States. I'm not sure they actually have any details that they could release, anyway.

 

[JonFrum]

How do you figure? the fund is at least 12 and by your figures of 120 percent funding about 18 billion short of being adequately funded. UPS is rumored to pay 6 billion to get out of the fund. Whose coughing up the other 12 billion buckaroos. You really need to take a remedial math course and try to educate yourself.
UPS and almost all other Employers owe their pro rata portion of the Fund's Actuarial Unfunded Vested Liability. These Employers must pay their Withdrawal Liability if they, in fact, withdraw. Those that withdraw pay it; Those that don't withdraw, don't pay it. If every Employer paid it tomorrow, the Fund would be Fully Funded. Those that don't pay it still legally owe it.

How do you figure. by your numbers the fund is 63 percent funded. Which means its 37 percent short of paying all the bills. If 120 percent funding is required then you need about 39 billion before the fund is adequately funded. That means by your numbers that there are approximately 18 billion dollars worth of liabilities not covered. The 21 billion in that fund is already committed to current liabilities. Are you planning on paying two bills with the same money? This is good the more I get you talking the weaker your explanation. Your master needs to feed you some better BS to sell here.

To pay 100% of the bills, you only need 100% of the Net Assets of a fully funded plan. My recomendation to overfund the Plan by 120% or more is a sign of prudence. The Fund would have extra money on hand. Should the stock market head south, the Fund would still be fully funded. My overfunding recomendation does not increase the Fund's liabilities as you seem to say. It's just extra money in the bank for a rainy day.

The $21 billion in the Asset Pool is available to pay all current expenses and many future expenses for some years to come. Remember, the Fund's Liabilities are an actuarial calculation. They include Liabilities that won't come due for one, two, three, or four decades from now. Only a portion are current (this year) bills that need to be paid right now.

Have you ever considered looking at the Fund's Form 5500, and reading an article on how pension plans work?

 

[JonFrum]

Re: UPDATE: 2nd quarter report now available

Thats the beutifull thing about gambling with the pension money in vegas. Occasionally you have some slight wins before the next big loss.

Fiduciaries have a legal obligation to invest prudently. In the case of Central States, investment decisions are made by the two Investment Firms that were designated the "Named Fiduciaries" under the Court Decree. They don't take undue risk. Unfortunately, there is an element of risk in all investments, and sometimes you loose money. Fiduciaries invest conservatively, they don't gamble.

 

[sawdusttv]

Re: UPDATE: 2nd quarter report now available

The Independent Special Counsel's quarterly report for the second quarter of 2007 is now available here:
http://www.centralstatesfunds.org/cs/Spcl_Councel_Report.asp
It states:
Net Assets as of June 30, 2007: $21,364,797,000.
Net Assets as of Dec. 31, 2006: $20,672,748,000.
That's a half year increase of: $692,049,000.

This is not surprising, if they keep cutting benifits back there comes a point when the fund levels off and then starts gaining again. It is plain and simple that if you cut what is going out and continue to bring money in that sooner or later the fund will start making money again. It doesn't mean that our fund is better off and our benefits are getting better. It just means that they have cut us low enough to stop the bleeding.

 

[sawdusttv]

Actually, your 37 cents is stuck in UPS' coffers. When they pay their Withdrawal Liability,
How do you figure? the fund is at least 12 and by your figures of 120 percent funding about 18 billion short of being adequately funded. UPS is rumored to pay 6 billion to get out of the fund. Whose coughing up the other 12 billion buckaroos. You really need to take a remedial math course and try to educate yourself.

The bills are paid out of the $21 billion in Net Assets.

How do you figure. by your numbers the fund is 63 percent funded. Which means its 37 percent short of paying all the bills. If 120 percent funding is required then you need about 39 billion before the fund is adequately funded. That means by your numbers that there are approximately 18 billion dollars worth of liabilities not covered. The 21 billion in that fund is already committed to current liabilities. Are you planning on paying two bills with the same money? This is good the more I get you talking the weaker your explanation. Your master needs to feed you some better BS to sell here.

If the fund was 100% or 120% funded as you say, UPS would not have to pay a penalty to get out, so why are they offering 6 billion dollars?

 

[tieguy]

The $21 billion in the Asset Pool is available to pay all current expenses( todays bills) and many future expenses for some years to come. Remember, the Fund's Liabilities are an actuarial calculation. They include Liabilities that won't come due for one, two, three, or four decades from now.( tommorrows bill's) Only a portion are current (this year) bills that need to be paid right now.

That would be next months and next years mortgage money jon. My point all along. If you use it to pay todays or those near term bills then you just used up the money you would have paid tommorrows bills with.
Anyway you add it up your still spending tommorrows money on todays bills in the hope that tommorrow will some how work itself out. I'm trying to keep the concept in simple terms so you understand what I'm saying here. You're right in one sense that this 21 billion can drag it out to a slow painfull death. But eventually those bills come due.

Have you ever considered looking at the Fund's Form 5500, and reading an article on how pension plans work?

Have you ever considered taking a basic finance course? How about math 101?

 

[Cezanne]

Sure sounds like a pyrimad social security scheme to me. If it is good enough for the government why segregrate Central States from the voodoo economics.

 

[JonFrum]

If the fund was 100% or 120% funded as you say, UPS would not have to pay a penalty to get out, so why are they offering 6 billion dollars?

Sawdusttv,
If Central States was 100% funded, no employer would incur any Withdrawal Liability if they exited the Fund. The last official word I heard was that the Fund was 63% funded. I assume it is even better funded currently, but I don't know for sure. It's a shame no one in authority puts out official information in a timely manner. It forces us to rely on old data, or current estimates.

It's not a "penalty" UPS would have to pay to get out, it's a legal debt they owe. The payment of the debt is triggered by UPS' actual withdrawal, if it should ever occur.

UPS is not "offering" $6 billion, they are being advised by the Fund Trustees that they owe $6 billion. Every Contributing Employer can request once a year, that the Fund calculate its Withdrawal Liability and show how the exact figure was arrived at. Now that UPS knows how much it owes, UPS can decide if it wants to stay or go. It seems they still want to go.

 

[JonFrum]

Sure sounds like a pyrimad social security scheme to me. If it is good enough for the government why segregrate Central States from the voodoo economics.

Cezanne,
Social Security is an inter-generational welfare scheme. The young who are working, pay money to the Social Security "Fund" and the money is immediately paid out to retirees of their parent's and grandparent's generation. There really isn't much of a "Fund" to speak of. Just a kind of very large scale checking account that takes in money from workers one day, and pays it out to retirees the next.

A Taft-Hartley Pension Plan is very different. Workers' contributions *accumulate* in a TRUST FUND and usually grow as the Fund's assets are invested and get a return on their investments. The Central States Fund literally has a FUND with over $21 billion in it.

 

[JonFrum]

Jon, $ 6 billion was lost pretty quick, and that's no small change.

Cole,
No doubt about it. It was a bitter pill to swallow.

But TDU notes, since then:
"Fund assets have grown by 40 percent in 3 and a half years."
https://web.archive.org/web/20101128223001/http://tdu.org/node/1369

 

[tieguy]

Re: UPDATE: 2nd quarter report now available

Fiduciaries have a legal obligation to invest prudently. In the case of Central States, investment decisions are made by the two Investment Firms that were designated the "Named Fiduciaries" under the Court Decree. They don't take undue risk. Unfortunately, there is an element of risk in all investments, and sometimes you loose money. Fiduciaries invest conservatively, they don't gamble.

Jon, I think its time for a reality check. If those fiduciaries suffer a loss that results in the funding percentage dropping down to the 40's as you admitted then we have some serious issues here where those fiduciaries were grossly negligent.

For instance the stable fund paid approximately 8 percent during those tough years. The bond market paid approximately 8 percent during those years. The bond market tends to go up as the stock market goes down during these years. So compentent financial money managers should have been able to realize modest gains of at least 2 percent during those lean years rather then the six billion dollar loss you admit to. Your six billion you admit to being lost plus the modest gain that should have occurred could be a swing of as much as 10 billion during the lean years. I'm averaging 15 to 20 percent return a year in this market and I was averaging 4 to 8 percent gains by investing in safer investments during the lean years. I am certainly no smarter then a highly trained money manager. this begs serious questions about those money managers entrusted to manage teamster pensions. The CS plan making some gains in this market is not enough. Serious questions and answers are required as to the investment philosophy of those entrusted to invest these funds. The plan getting better during the good years is not enough. What do they do to minimize the losses during the down years. Do they know how to invest during the down years? Someone who understands the market can make money no matter how the market is behaving. Yet those who manage CS lost a ton.

 

[jonFrum]

Re: UPDATE: 2nd quarter report now available

Jon, I think its time for a reality check. If those fiduciaries suffer a loss that results in the funding percentage dropping down to the 40's as you admitted then we have some serious issues here where those fiduciaries were grossly negligent.

For instance the stable fund paid approximately 8 percent during those tough years. The bond market paid approximately 8 percent during those years. The bond market tends to go up as the stock market goes down during these years. So compentent financial money managers should have been able to realize modest gains of at least 2 percent during those lean years rather then the six billion dollar loss you admit to. Your six billion you admit to being lost plus the modest gain that should have occurred could be a swing of as much as 10 billion during the lean years. I'm averaging 15 to 20 percent return a year in this market and I was averaging 4 to 8 percent gains by investing in safer investments during the lean years. I am certainly no smarter then a highly trained money manager. this begs serious questions about those money managers entrusted to manage teamster pensions. The CS plan making some gains in this market is not enough. Serious questions and answers are required as to the investment philosophy of those entrusted to invest these funds. The plan getting better during the good years is not enough. What do they do to minimize the losses during the down years. Do they know how to invest during the down years? Someone who understands the market can make money no matter how the market is behaving. Yet those who manage CS lost a ton.

Tieguy,
Why are you directing this to me? Shouldn't you take your allegations and evidence to the Justice Department or the Labor Department or the FBI or a U.S. Attorney or whatever?

Let us know when a trial date is set.

 

[Bill]

Re: UPDATE: 2nd quarter report now available

This is not surprising, if they keep cutting benifits back there comes a point when the fund levels off and then starts gaining again. It is plain and simple that if you cut what is going out and continue to bring money in that sooner or later the fund will start making money again. It doesn't mean that our fund is better off and our benefits are getting better. It just means that they have cut us low enough to stop the bleeding.

Another reason that the fund improved, is that less people are able to retire under CS restrictions. Now, what happens ten years down the road when more people start retiring? The CS pension fund is back to square one, but now it is in much worse shape. The only thing that CS did was to delay the inevitable. CS will be insolvent by then, unless they make cuts that are more extreme than the present cuts. The handwriting is on the wall, but many of you refuse to look at the wall.

 

[sawdusttv]

Re: UPDATE: 2nd quarter report now available

Another reason that the fund improved, is that less people are able to retire under CS restrictions. Now, what happens ten years down the road when more people start retiring? The CS pension fund is back to square one, but now it is in much worse shape. The only thing that CS did was to delay the inevitable. CS will be insolvent by then, unless they make cuts that are more extreme than the present cuts. The handwriting is on the wall, but many of you refuse to look at the wall.

I am sure that if the rules stay as they are that we have not seen the last of the pension cuts!

 

[tieguy]

Re: UPDATE: 2nd quarter report now available

Tieguy,
Why are you directing this to me? Shouldn't you take your allegations and evidence to the Justice Department or the Labor Department or the FBI or a U.S. Attorney or whatever?

Let us know when a trial date is set.

Wow our world reknown pension expert is now getting defensive. Jon my commentary was on poor investment choices being made. My commentary was the accountability of the money managers that needs to take place. your thought about calling the fbi is totally illogical here even though it is a crime that they have screwed up so many hard working upsers pensions I can't call the fbi on it.

 

[tieguy]

Sawdusttv,
If Central States was 100% funded, no employer would incur any Withdrawal Liability if they exited the Fund.

Thats earthshaking . So If all of the other companies that feed the fund went bankrupt and they had no tangible assets to recoup from then would UPS be liable for the entire 37 percent? You betcha.

 

[JonFrum]

Sawdusttv,
If Central States was 100% funded, no employer would incur any Withdrawal Liability if they exited the Fund.

Thats earthshaking . So If all of the other companies that feed the fund went bankrupt and they had no tangible assets to recoup from then would UPS be liable for the entire 37 percent? You betcha.

Correct.

But are you seriously worried that all 3000 or so other Contributing Employers will be simultaneously wiped off the face of the earth, and that UPS will *somehow* be untouched?

If you're worried about a hovering armada of space-alien warships with their vaporizing energy rays, relax, this time we know Slim Whitman's yodeling blasting over the loudspeakers will make their heads explode!!!

 

[JonFrum]

The $21 billion in the Asset Pool is available to pay all current expenses( todays bills) and many future expenses for some years to come. Remember, the Fund's Liabilities are an actuarial calculation. They include Liabilities that won't come due for one, two, three, or four decades from now.( tommorrows bill's) Only a portion are current (this year) bills that need to be paid right now.

That would be next months and next years mortgage money jon. My point all along. If you use it to pay todays or those near term bills then you just used up the money you would have paid tommorrows bills with.
Anyway you add it up your still spending tommorrows money on todays bills in the hope that tommorrow will some how work itself out. I'm trying to keep the concept in simple terms so you understand what I'm saying here. You're right in one sense that this 21 billion can drag it out to a slow painfull death. But eventually those bills come due.

Have you ever considered looking at the Fund's Form 5500, and reading an article on how pension plans work?

Have you ever considered taking a basic finance course? How about math 101?

Let's look at Central States' Form-5500 for the years 2003, 2004, and 2005, the most recent available on FreeErisa.

To start with, the Plan had Net Assets of $15.4 billion in 2002.

In 2003 the Plan had Expenses (bills to pay) of $2.5 billion, and Income of $4.8 billion, which increased its Net Assets $2.3 billion to $17.7 billion.

In 2004 the Plan had Expenses (bills to pay) of $2.6 billion, and Income of $3.6 billion, which increased its Net Assets $1 billion to $18.7 billion.

In 2005 the Plan had Expenses (bills to pay) of$2.7 billion, and Income of $3.2 billion, which increased its Net Assets $0.6 billion to $19.3 billion.

Net Assets, the money left over after all the bills have been paid, continued to increase in 2006 by $1.4 billion to $20.7 billion.

Net Assets continued to increase in the first half of 2007 by $0.7 billion to $21.4 billion.

Central States has problems, but it's not that hard to pay the bills as they come due, when you're sitting on a $21.4 billion mountain of money. Especially when new money is always flowing in at a higher rate than old money is being paid out.

 

[tieguy]

Correct.

But are you seriously worried that all 3000 or so other Contributing Employers will be simultaneously wiped off the face of the earth, and that UPS will *somehow* be untouched?

No , trying to figure out why ups is paying 6 billion of the shortfall if their really are 3000 employees contributing. I highlighted my point to the extreme and this time you bit on my lure.

If you're worried about a hovering armada of space-alien warships with their vaporizing energy rays, relax, this time we know Slim Whitman's yodeling blasting over the loudspeakers will make their heads explode!!!

Jon try to keep your feet on the ground we're talking about peoples livelyhoods and retirements here.

 

[JonFrum]

Re: UPDATE: 2nd quarter report now available

Jon, I think its time for a reality check. If those fiduciaries suffer a loss that results in the funding percentage dropping down to the 40's as you admitted then we have some serious issues here where those fiduciaries were grossly negligent.

For instance the stable fund paid approximately 8 percent during those tough years. The bond market paid approximately 8 percent during those years. The bond market tends to go up as the stock market goes down during these years. So compentent financial money managers should have been able to realize modest gains of at least 2 percent during those lean years rather then the six billion dollar loss you admit to. Your six billion you admit to being lost plus the modest gain that should have occurred could be a swing of as much as 10 billion during the lean years. I'm averaging 15 to 20 percent return a year in this market and I was averaging 4 to 8 percent gains by investing in safer investments during the lean years. I am certainly no smarter then a highly trained money manager. this begs serious questions about those money managers entrusted to manage teamster pensions. The CS plan making some gains in this market is not enough. Serious questions and answers are required as to the investment philosophy of those entrusted to invest these funds. The plan getting better during the good years is not enough. What do they do to minimize the losses during the down years. Do they know how to invest during the down years? Someone who understands the market can make money no matter how the market is behaving. Yet those who manage CS lost a ton.

You say it's time for a Reality Check, and ask that I Keep It Real. I've asked you to "put up or shut up" by taking your allegations and evidence (if any) to the Authorities. You refuse. That tells me you probably *do* understand that investing carries no guarantees. Everyone has bad years once and a while. Indeed, in a down market, almost *everyone* has bad years. Central States lost money just as did almost all other pension plans, just as did almost all UPSers in their privately directed 401(k) and IRA investments. You didn't loose money, I didn't loose money, but that doesn't automatically mean those who did are incompetent or criminal. Again, if you have hard evidence, take it to the Authorities.

The Form 5500's available on FreeErisa are not the *full* versions of the Annual Reports. If you contact the Fund itself, or the Department of Labor, you can obtain the full reports which include all the details about what stocks, bonds, etc. were bought and sold. It's all there.

As you know, Central States is a special case. It is run by Judge Moran, under 1982 Consent Decrees, and the investment decisions have been made by "Named Fiduciaries": Goldman Sachs Asset Management, J. P. Morgan, and Northern Trust Global Advisors. The fund is otherwise run by a Board of Trustees, half of which (the Employer Trustees) are approved by UPS.