Pension fix

[Brownslave688]

Change defined benefit to defined contribution. It’s thats simple.

 

[DELACROIX]

One definition of a Ponzi scheme:
'a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.'

The pensions are not based on nonexistent enterprises (though some of them no longer exist).
They do however, provide payouts to the early investors through the contributions from later investors. In this, they are like Ponzi schemes. They cannot pay earlier investors (retirees) solely off the investment that those investors put in. They require a constant influx of new investors (current working contributors) in order to pay benefits. Just like a Ponzi scheme, if the new influx of money stops or slows, the scheme fails.

If the pensions were truly sustainable, the average retiree would take out in benefits no more than what they payed in. If that were the case, retirees would never take one red cent from currently working contributors. It would not matter how many companies went under our even if no new workers ever got into the plan, you take out only what was put in in your name.

That's not how they were structured. In most pensions, the average retiree winds up pulling more than what was put in for them. They survived like a pyramid or Ponzi scheme, by the constant growth of the work force. Now that that growth rate is stalling, they are failing.

So now CS is trying to bone UPS by cutting benefits way more heavily to UPS retirees because UPS agreed back in 07 to make up shortfalls for those employees. Nice.
The current retirees, out of desperation, want a mortgage to get them into the grave at their current level, meaning in 30 years, the fund gets a multi billions payment liability and goes belly up boning you guys working now.

So basically, this proposed plan is a 30 year Ponzi scheme to extend the life of the old Ponzi scheme long enough for current retirees to shuffle off their mortal coils in comfort.

I am taking a gambit on this and will assume that everybody concerned know just how pensions funds are designed. It is a pyramid system...The healthy plans..much unlike the CSPF are built on newer, younger participants that when under a (monetary contribution plan) similar to the Western Conference will continue to expand and grow, thus providing monetary stability with their current retirees and and future growth with their happy actives. Last count (about 49 Billion assets with about 650,000 participants)..Well done Western, good job..

The Western had so much going for their plan compared to the Central below are some of them:

a. They continued to add other collective bargaining industries other than just trucking, expanding their field of newer participants. The deregulation of the trucking in the 80's and the failure of Washington to fully understand or care about the impact it would have on the CSPF.

b. From my understanding (ALL) their part time employees were contributing monetary. Unlike the Central were all the part timers were covered under their company controlled (UPS Pension Plan), a (Defined Benefit Plan) that is not funded under the Article 34 (Master) monetary weekly contribution formula, so if the quoted statement of the UPS part time workforce being at 65 percent is true, it would be fair to say it hurt the Central big time over the last 30 years or so.

c. The Federal Oversight into the corruption of the CSPF in the 70's would of been a factor also.

Bottom line rather than drag this out...There is not enough money in the Federal Pension Insurance fund to cover a total collapse of the CSPF fund, so they will not be left holding the bag over this. The MPRA will again be submitting a cut of pension benefits for (EVERYBODY) with pension credits under CSPF. I expect that the cuts will be across the board not favoring any industries actives or retirees, and yes UPS will be accountable to their agreed obligations under the withdraw agreement back in 2007...

 

[Inthegame]

Change defined benefit to defined contribution. It’s thats simple.

And that "fixes" nothing.

 

[Inthegame]

One definition of a Ponzi scheme:
'a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.'

The pensions are not based on nonexistent enterprises (though some of them no longer exist).

So far so good...

They do however, provide payouts to the early investors through the contributions from later investors. In this, they are like Ponzi schemes. They cannot pay earlier investors (retirees) solely off the investment that those investors put in.

You're describing a "new" plan, not the mature plans we are all under. When the plan I'm in first started (in the 1950's), contributions were made from participating employers for a year before any benefits were paid. The max monthly retiree benefit (unreduced age 65) was a multiple of each employees' employer contributions with interest added. Less than 3% of participants "retired" in the first three years, thereby allowing the plan to have more funds available for investment than benefit payment. That pooled investment income, not continuing contributions allowed the plan to fulfill it's obligations and make good on the promised benefit payments.

That's how sustainable pensions succeed, and why ponzi's never do.

That's not how they were structured. In most pensions, the average retiree winds up pulling more than what was put in for them.

Correct in some plans. Coal miners probably not, but as life expectancy increases, months of benefit payments increase. Mature plans account for these conditions in the actuarial determinations for pct of plan funding levels.

So now CS is trying to bone UPS by cutting benefits way more heavily to UPS retirees because UPS agreed back in 07 to make up shortfalls for those employees. Nice.

UPS employees were in the least cut tier in the last "Rescue Plan" submitted by CSPF to the treasury dept. that was rejected as not cutting enough.
Obviously UPS accountants that consulted with UPS negotiators regarding the "shortfall make-up" language weren't expecting the '08 meltdown as the withdrawal liability payment put the CSPF in + 80% funding, thereby not requiring consideration for any cuts.
Maybe they needed a clairvoyant brownIEman on that group to keep them from getting "boned" by following a contractual promise.

 

[BigUnionGuy]

@Inthegame.... brings a lot to the table.

 

[1989]

I am taking a gambit on this and will assume that everybody concerned know just how pensions funds are designed. It is a pyramid system...The healthy plans..much unlike the CSPF are built on newer, younger participants that when under a (monetary contribution plan) similar to the Western Conference will continue to expand and grow, thus providing monetary stability with their current retirees and and future growth with their happy actives. Last count (about 49 Billion assets with about 650,000 participants)..Well done Western, good job..

The Western had so much going for their plan compared to the Central below are some of them:

a. They continued to add other collective bargaining industries other than just trucking, expanding their field of newer participants. The deregulation of the trucking in the 80's and the failure of Washington to fully understand or care about the impact it would have on the CSPF.

b. From my understanding (ALL) their part time employees were contributing monetary. Unlike the Central were all the part timers were covered under their company controlled (UPS Pension Plan), a (Defined Benefit Plan) that is not funded under the Article 34 (Master) monetary weekly contribution formula, so if the quoted statement of the UPS part time workforce being at 65 percent is true, it would be fair to say it hurt the Central big time over the last 30 years or so.

c. The Federal Oversight into the corruption of the CSPF in the 70's would of been a factor also.

Bottom line rather than drag this out...There is not enough money in the Federal Pension Insurance fund to cover a total collapse of the CSPF fund, so they will not be left holding the bag over this. The MPRA will again be submitting a cut of pension benefits for (EVERYBODY) with pension credits under CSPF. I expect that the cuts will be across the board not favoring any industries actives or retirees, and yes UPS will be accountable to their agreed obligations under the withdraw agreement back in 2007...

You are leaving out the most important factors about the WCTPT.

1. In 2017 investment returns were 14.1%. Doubling the assumed rate of 7%

2. Plan assets increased by 3.77 billion. And plan income increased by nearly 46%

3. Plan contributions increased by 8.27%

 

[DELACROIX]

See what is happening now with the Central States Health and Welfare plan (TeamCare) currently very similar to what is happening in the WCTPT. Well run and heavily funded with new participants being added daily.

Maybe the company got schooled again similar to what @Inthegame stated, by overestimating their projections of massive increases in Health and Welfare costs associated with covering their union employees and retirees.

Maybe we just had better "clairvoyants" on our side than the companies' higher prices ones..

 

[Bubblehead]

See what is happening now with the Central States Health and Welfare plan (TeamCare) currently very similar to what is happening in the WCTPT. Well run and heavily funded with new participants being added daily.

Maybe the company got schooled again similar to what @Inthegame stated, by overestimating their projections of massive increases in Health and Welfare costs associated with covering their union employees and retirees.

Maybe we just had better "clairvoyants" on our side than the companies' higher prices ones..

Don't forget the unprecedented annual deductibles....

 

[brownIEman]

So far so good...
You're describing a "new" plan, not the mature plans we are all under. When the plan I'm in first started (in the 1950's), contributions were made from participating employers for a year before any benefits were paid. The max monthly retiree benefit (unreduced age 65) was a multiple of each employees' employer contributions with interest added. Less than 3% of participants "retired" in the first three years, thereby allowing the plan to have more funds available for investment than benefit payment. That pooled investment income, not continuing contributions allowed the plan to fulfill it's obligations and make good on the promised benefit payments.

That's how sustainable pensions succeed, and why ponzi's never do.

Correct. I would argue that CS, if it did not start with ponzi-esq attributes quickly adapted them as employer-union negotiations saw those entities agreeing to up promised benefits without fully funding them which was feasible under a continually growing workforce in the early decades. It certainly cannot at this point meet anywhere near its pension obligations without new input from current workers, making it quite Ponzi-ish.

UPS employees were in the least cut tier in the last "Rescue Plan" submitted by CSPF to the treasury dept.

Not according to this article originally linked earlier by @UnconTROLLed

According to this article, the proposed average cuts were 29% for Tier1, 34% for Tier II and 53% for Tier III. The Tier III employees are the UPS employees. That looks like the UPS retirees are taking a larger cut, which of course would be totally understandable, as by gouging those employees with larger cuts, you save money to give less harsh cuts to the others, knowing UPS will have to make up the cuts to their employees. Understandable, but certainly not fair, and UPS argued, not legal. Now, I admit that these numbers come from UPS spokespersons from the article, so if you have a less biased source to support your claim the UPS retiree's benefits were actually the least cut under the proposal, I wold be interested to see it.

Maybe they needed a clairvoyant brownIEman on that group to keep them from getting "boned" by following a contractual promise.

Meh, if they had had such a person, they would not have listened to him anyway.

 

[Jones]

Pension funds have their problems and some clearly need to be managed better, but they are in no way shape or form "Ponzi schemes". People who call them that are either badly misinformed or lying.

 

[DELACROIX]

Pension funds are governed by Federal Law (ERISA).."Ponzi Schemes" are not..

 

[DELACROIX]

Don't forget the unprecedented annual deductibles....

YES... ouch! and I get your point..!!!

 

[brownIEman]

Pension funds are governed by Federal Law (ERISA).."Ponzi Schemes" are not..

Madoff was charged with 11 Federal Felonies, leading me to believe there are indeed federal laws governing ponzi schemes...

 

[Inthegame]

Not according to this article originally linked earlier by @UnconTROLLed

According to this article, the proposed average cuts were 29% for Tier1, 34% for Tier II and 53% for Tier III. The Tier III employees are the UPS employees. That looks like the UPS retirees are taking a larger cut, which of course would be totally understandable, as by gouging those employees with larger cuts, you save money to give less harsh cuts to the others, knowing UPS will have to make up the cuts to their employees. Understandable, but certainly not fair, and UPS argued, not legal. Now, I admit that these numbers come from UPS spokespersons from the article, so if you have a less biased source to support your claim the UPS retiree's benefits were actually the least cut under the proposal, I wold be interested to see it.

I have no access to my copy of the Rescue Plan docs but I did find some info on "tiers" from an online explanation letter sent to participants.

Contribution Tiers
Federal law establishes three “tiers” of benefits under the Plan, and sets out different conditions for the reductions that are applied to the benefits attributable to each tier. The tiers are defined as follows: 23.1.5

• Tier 1 consists of benefits attributable to contributions made by an employer that withdrew from the Plan on or before July 1, 2016, but failed to pay (or is delinquent with respect to paying) the full amount of its withdrawal liability under law or an agreement with the Plan.

• Tier 2 consists of all benefits attributable to contributions not assigned to Tier 1 or Tier 3.

• Tier 3 consists of benefits attributable to contributions made by an employer that (a) has withdrawn from the Plan in a complete withdrawal in which the employer paid the full amount of the employer’s withdrawal liability under law or an agreement with the Plan, and also (b) pursuant to a collective bargaining agreement, has agreed to provide benefits to participants and beneficiaries of the Plan under a separate, single-employer-sponsored plan, in an amount equal to any reduction in the amount of benefits for such participants and beneficiaries as a result of the financial status of the Plan. The only benefits assigned to Tier 3 are those attributable to contributions made by United Parcel Service, Inc. and its controlled group (“UPS”) for participants that are part of the Transfer Group under an agreement between UPS and the Plan dated September 29, 2007 (generally those participants who were active participants with UPS or whose last employer prior to becoming terminated vested was UPS as of that date). Benefits that are assigned to Tier 3 are guaranteed by UPS against reduction “as a result of the financial status of the plan.” Participants with such benefits will receive an offset against any benefits they lose as part of the benefit reductions in the Plan under a separate retirement plan sponsored by UPS. Please note that participants who retired prior to that date are not part of Tier 3, even if they worked for UPS because the pension benefits of those participants are not protected by UPS. Federal law requires that benefits attributable to Tier 1 be reduced to the maximum extent permissible. In general, the amount of Tier 1 benefits after the reduction will be determined by multiplying the 110% of the PBGC guarantee amount (described below) by the participant’s percentage of total contributions in Tier 1. In addition, reductions to Tier 1 benefits will be limited by the disability and age-based protections described below. Benefits that are attributable to Tier 2 or Tier 3 contributions (determined based on the participant’s percentage of total contributions from Tier 2 or Tier 3, respectively) generally will be reduced in accordance with the structure outlined below under General Benefit Reduction Provisions, subject to the Federal Law Limitations on Benefit Reductions below. For benefits attributable to Tier 2 contributions, the benefit reduction to participants with at least 20 years of Contributory Service Credit as of July 1, 2016 will not be greater than 50% of the amount that would otherwise have been payable with 23.1.6 respect to such contributions before the reduction (prior to application of the age-based protections described below). For benefits attributable to Tier 3 contributions, the benefit reduction to participants with at least 20 years of Contributory Service Credit as of July 1, 2016 will not be greater than 40% of the amount that would otherwise have been payable with respect to such contributions before this reduction (prior to application of the age-based protections described below).

UPS also had most of their "comments" to the rehab plan found to be without merit by the Treasury dept.

Nonetheless, the "rescue" plan was rejected as insufficient to save the plan, which is oxymoronic as the plan's decline has been accelerated by inaction.

Sorry for the long read.

 

[Inthegame]

I have no access to my copy of the Rescue Plan docs but I did find some info on "tiers" from an online explanation letter sent to participants.

Contribution Tiers
Federal law establishes three “tiers” of benefits under the Plan, and sets out different conditions for the reductions that are applied to the benefits attributable to each tier. The tiers are defined as follows: 23.1.5

• Tier 1 consists of benefits attributable to contributions made by an employer that withdrew from the Plan on or before July 1, 2016, but failed to pay (or is delinquent with respect to paying) the full amount of its withdrawal liability under law or an agreement with the Plan.

• Tier 2 consists of all benefits attributable to contributions not assigned to Tier 1 or Tier 3.

• Tier 3 consists of benefits attributable to contributions made by an employer that (a) has withdrawn from the Plan in a complete withdrawal in which the employer paid the full amount of the employer’s withdrawal liability under law or an agreement with the Plan, and also (b) pursuant to a collective bargaining agreement, has agreed to provide benefits to participants and beneficiaries of the Plan under a separate, single-employer-sponsored plan, in an amount equal to any reduction in the amount of benefits for such participants and beneficiaries as a result of the financial status of the Plan. The only benefits assigned to Tier 3 are those attributable to contributions made by United Parcel Service, Inc. and its controlled group (“UPS”) for participants that are part of the Transfer Group under an agreement between UPS and the Plan dated September 29, 2007 (generally those participants who were active participants with UPS or whose last employer prior to becoming terminated vested was UPS as of that date). Benefits that are assigned to Tier 3 are guaranteed by UPS against reduction “as a result of the financial status of the plan.” Participants with such benefits will receive an offset against any benefits they lose as part of the benefit reductions in the Plan under a separate retirement plan sponsored by UPS. Please note that participants who retired prior to that date are not part of Tier 3, even if they worked for UPS because the pension benefits of those participants are not protected by UPS. Federal law requires that benefits attributable to Tier 1 be reduced to the maximum extent permissible. In general, the amount of Tier 1 benefits after the reduction will be determined by multiplying the 110% of the PBGC guarantee amount (described below) by the participant’s percentage of total contributions in Tier 1. In addition, reductions to Tier 1 benefits will be limited by the disability and age-based protections described below. Benefits that are attributable to Tier 2 or Tier 3 contributions (determined based on the participant’s percentage of total contributions from Tier 2 or Tier 3, respectively) generally will be reduced in accordance with the structure outlined below under General Benefit Reduction Provisions, subject to the Federal Law Limitations on Benefit Reductions below. For benefits attributable to Tier 2 contributions, the benefit reduction to participants with at least 20 years of Contributory Service Credit as of July 1, 2016 will not be greater than 50% of the amount that would otherwise have been payable with 23.1.6 respect to such contributions before the reduction (prior to application of the age-based protections described below). For benefits attributable to Tier 3 contributions, the benefit reduction to participants with at least 20 years of Contributory Service Credit as of July 1, 2016 will not be greater than 40% of the amount that would otherwise have been payable with respect to such contributions before this reduction (prior to application of the age-based protections described below).

UPS also had most of their "comments" to the rehab plan found to be without merit by the Treasury dept.

Nonetheless, the "rescue" plan was rejected as insufficient to save the plan, which is oxymoronic as the plan's decline has been accelerated by inaction.

Sorry for the long read.

I almost TLDR'd my own post. Here's the Readers Digest version.

Tier 1: reduces monthly benefit to 110% of PBGC guarantee.
PBGC guarantee is 30% of normal benefit received (with some exceptions for age and disability)
Fred Freight receives $1500 per month. CSPF Rescue Plan gets approved, Fred's benefit gets reduced to $1500 X 30% = $450 X 110% = $495
Fred loses 67% of his benefit.

Tier 2: reduces those with less than 20 yrs contributory service by 50%.
Bob Baker retired with 19yrs of service and qualifies for a $1900 monthly benefit. CSPF Rescue Plan is approved. Bob now gets $950, a 50% reduction.

Tier 3: (UPS employees) reduces those with more than 20 yrs of contributory service by 40%.
1) Billy Box retired in early 2007 with 30yrs of service and qualifies for a $3000 monthly benefit. CSPF Rescue Plan is approved. Billy's benefit gets reduced by 40% or $1200. Billy now gets $1800.
2) Paul Package retired in 2008 with 30 yrs and qualifies for a $3000 monthly benefit. Paul also gets reduced by 40% but qualifies for the 2007 NMA contractual offset. CSPF pays Paul $1800 monthly, UPS pays Paul $1200 monthly.

While the monthly dollar reduction is greater in the Tier 3 (1) example than in either 1 or 2, the pct of reduction is greater for the Tier 1 and 2 parties. Had Tier 1 started at the same monthly benefit as the other examples, that dollar reduction would have been greater.

 

[Inthegame]

I almost TLDR'd my own post. Here's the Readers Digest version.

Tier 1: reduces monthly benefit to 110% of PBGC guarantee.
PBGC guarantee is 30% of normal benefit received (with some exceptions for age and disability)
Fred Freight receives $1500 per month. CSPF Rescue Plan gets approved, Fred's benefit gets reduced to $1500 X 30% = $450 X 110% = $495
Fred loses 67% of his benefit.

Tier 2: reduces those with less than 20 yrs contributory service by 50%.
Bob Baker retired with 19yrs of service and qualifies for a $1900 monthly benefit. CSPF Rescue Plan is approved. Bob now gets $950, a 50% reduction.

Tier 3: (UPS employees) reduces those with more than 20 yrs of contributory service by 40%.
1) Billy Box retired in early 2007 with 30yrs of service and qualifies for a $3000 monthly benefit. CSPF Rescue Plan is approved. Billy's benefit gets reduced by 40% or $1200. Billy now gets $1800.
2) Paul Package retired in 2008 with 30 yrs and qualifies for a $3000 monthly benefit. Paul also gets reduced by 40% but qualifies for the 2007 NMA contractual offset. CSPF pays Paul $1800 monthly, UPS pays Paul $1200 monthly.

While the monthly dollar reduction is greater in the Tier 3 (1) example than in either 1 or 2, the pct of reduction is greater for the Tier 1 and 2 parties. Had Tier 1 started at the same monthly benefit as the other examples, that dollar reduction would have been greater.

Before anyone jumps out of a basement window...the above examples are moot as the CSPF Rescue Plan was rejected by the Treasury department as insufficient to resolve the funding shortfall.

 

[UPSTeamster Pragmatist]

Holy crap! Everyone here apparently grew up too poor to pay attention.

 

[rod]

Holy crap! Everyone here apparently grew up too poor to pay attention.

My mom cut the bottom out my pants pockets just so I had something to play with.

 

[UPSTeamster Pragmatist]

LOL

 

[Frankie's Friend]

Before anyone jumps out of a basement window...the above examples are moot as the CSPF Rescue Plan was rejected by the Treasury department as insufficient to resolve the funding shortfall.

Can we presume that ups has a "plan"?
Of course they do.