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UPS subsidizing non ups pensions
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<blockquote data-quote="JonFrum" data-source="post: 121743"><p>Still waiting for proof of the massive subsidy of other retirees by UPS. . . . Remember, everyone, the burden of proof is always on he who makes the assertion, in this case, on those who claim UPS is subsidizing non-UPS retirees by as much as 60%, leaving UPS retirees to settle for only 40% of the funds UPS contributed on their behalf. UPS contributes over a billion dollars every year to these funds and like they say in Washington, DC about our tax money: "a billion here, a billion there, pretty soon were talkin' real money." </p><p></p><p> I assume everyone would like proof of where this money --- our money --- has been going, and proof of where various people propose to put it in the future. It's like going down to the basement to examine your existing house for water damage, termite damage, etc., and examining any proposed replacement house for the same, as well as to make sure the new house actually exists as advertised in the first place. </p><p>- - - - -</p><p>Many retirees take their retirement in the form of a Lump Sum. Here in the New England fund, anyone with a small retirement is cashed-out in a one-time lump sum payment when they become eligible to collect, usually at age 64. (In Central States "Normal Retirement Age" is 65, I'm told.) Other retirees with higher monthly benefit check levels can take a lump sum of 10% at the start of their retirement. Their monthly benefit check amount is reduced accordingly. Still other retirees are cashed-out by the fund buying an annuity for them. The annuity company assumes the responsibility of providing a monthly check to the retiree until their death or until their spouse's death depending on the arrangement. Some retirees opt for a guaranteed number of checks, and understand that they will get every check no matter what their personal circumstances, but that the checks will stop eventually and they may outlive their money. The point of all this is any non-UPS retiree in any of these payout situations has in effect been paid off by the plan out of existing plan money at the time of their initial retirement. Such retirees are not an ongoing drain on UPS or even on the fund as a whole. Any Lump Sum payoff or Annuity payoff is, in effect, old news and has already been accounted for by the fund's actuaries who are routinely recalculating the fund's financial status and what benefits it can afford to pay, and under what conditions and assumptions. Any analysis of possible subsidy should exclude all these cashed-out retirees, just as non-vested retirees who are ineligible for any benefits at all must be excluded. </p><p>- - - - -</p><p>I hope everyone understands that pension matters are complicated enough to start with, and even more so with the numerous plans, each with there own set of features, plus the new pension law. It's hard for me or anyone to say anything definitive that will apply to all plans at all times. There will be unavoidable oversimplifications and exceptions to every rule. Oh, and pension stuff is really, really booring, too! </p><p>- - - - -</p><p>When evaluating a set of bonehead trustees who invested your funds assets in stocks or real estate or whatever, and lost a significant portion of your future retirement money, let's be fair. The markets usually bounce back partially shortly thereafter, so the loss isn't as big as first experienced. They shouldn't have had your funds at risk in the first place, but since they did, let's be accurate and recognize the net loss is not as bad as the initial loss. </p><p>- - - - -</p><p>If trustees, or anyone else, suggest that "changing demographics" are the reason your benefits are being cut, they are just trying to deflect your attention away from the fact that they lost a big chunk of your money, instead of making a big chunk of money on your money. The adverse demographic they point to the most is the dwindling number of active (contributing) plan members, and the increasing number of plan retirees, who cost the fund money with every benefit check they collect. The moment when the number of Retirees actually exceeds the number of Actives apparently has special mystical significance, like a full eclipse to the Druids. Some funds have passed this point. But so what? Remember, your account is an individual one (sorta, kinda) and is relatively independent of other accounts. Grouping all active accounts together into an Active Contributors group, and grouping all retirees into a Retirees Who Are Draining Our Assets Monthly group is interesting but of limited usefulness. Indeed, the whole purpose of the plan is for everyone to be an Active contributor for many years, build up a sizable account, then switch to Retiree and live off the money. The groupings are somewhat artificial. </p><p></p><p>Imagine a really small fund, just a thousand 21 year old guys who all get hired on the same day, contribute to the fund at the same hourly rate, work 30 years, and all retire on the same day. The fund would initially come into existance to receive their first month's contributions, then assets would steadily grow monthly over the next thirty years (assuming no bonehead trustee investment advisors), with no retirees draining the fund. Then, everyone would file for retirement and slowly begin depleating the fund until it eventually went out of existance in an orderly manner having served its purpose. This is greatly oversimplified, but it illustrates that as long as the trustees and the actuaries do their job, and as long as the members are kept informed so they know what kind of retirement checks to expect, then it's OK for a fund to be lopsided in favor of Actives now and Retirees later. </p><p></p><p> Just as the country has been steadily abandoning Unions for the last half century, so they are now abandoning Defined Benefit pension plans. Fewer want to join an existing plan, and no one wants to start a new plan. A fund with an "excess" of retirees is a shrinking fund and will be the norm from now on. This will psychologically make the trustees and plan sponsors feel uneasy, especially if they believe size matters. Note that when an active member retires the fund takes a double hit. First the fund looses the member's regular contributions. Second, the fund begins paying out benefits. Trustees must have mixed feelings when they see you walk in the door to file your retirement papers. </p><p>- - - - -</p><p>If a plan looses money through bad investing, the losses are distributed over everyone in the plan, except those who have already begun collecting retirement checks and those who have earned vested benefits. Trustees are forbidden by law to decrease retiree benefit levels once they have begun collecting. And trustees can not reduce vested benefits of active and inactive-but-not-yet-retired members. Trustees can, and probably must, reduce the future benefit accrual rates for any pension credits earned from that day foreward. They can also move the goal post further away so you have to work longer until you are eligible to retire. ( Social Security has also moved the goal post from 65 to 66 to 67 for younger workers.) Trustees are obligated to constantly rebalance the fund actuarily so future obligations are in line with assets and contributions and investment gains (or losses.) Trustees have a "fiduciary duty" to run the plan in the sole interest of the plan participants as a whole, so they spread out gains and losses over everyone that they can, legally. They also amortize everything, which is the spreading out over time. This way no one, or no group is singled out to bare the burden or reap the reward of a momentary gain or loss. That's the theory anyway. Spreading out losses in as many ways as possible also spreads the misery more thinly so no group will be so enraged as to sue the trustees. </p><p>- - - - -</p><p>Let's clarify that the individual account you have as an active member of the pension plan has some strings attached. First, you don't have a right to any of the money until you get vested. That takes five years; it use to take ten! Second, the money isn't collectible until you reach a certain age like 52 or 55 or 57 or 64 or 65 or whatever depending on the details of your fund rules. Third, if you are eligible to retire at the earlier ages, you will have your monthly benefit reduced accordingly. Other strings apply as well. Your money is comingled with everyone else's but your Pension Credit Account is seperate and keeps track. Your account is not actually denominated in dollars, it's in Pension Credits, which are convertible to dollars eventually, kind of like casino chips, except that Vegas at least doesn't lower the value of some of the chips as you walk toward the teller window. Pension trustees must rebalance the fund to keep it financially sound and in compliance with the law, so if the fund has troubles, you have troubles. "Pay attention to your pension."</p></blockquote><p></p>
[QUOTE="JonFrum, post: 121743"] Still waiting for proof of the massive subsidy of other retirees by UPS. . . . Remember, everyone, the burden of proof is always on he who makes the assertion, in this case, on those who claim UPS is subsidizing non-UPS retirees by as much as 60%, leaving UPS retirees to settle for only 40% of the funds UPS contributed on their behalf. UPS contributes over a billion dollars every year to these funds and like they say in Washington, DC about our tax money: "a billion here, a billion there, pretty soon were talkin' real money." I assume everyone would like proof of where this money --- our money --- has been going, and proof of where various people propose to put it in the future. It's like going down to the basement to examine your existing house for water damage, termite damage, etc., and examining any proposed replacement house for the same, as well as to make sure the new house actually exists as advertised in the first place. - - - - - Many retirees take their retirement in the form of a Lump Sum. Here in the New England fund, anyone with a small retirement is cashed-out in a one-time lump sum payment when they become eligible to collect, usually at age 64. (In Central States "Normal Retirement Age" is 65, I'm told.) Other retirees with higher monthly benefit check levels can take a lump sum of 10% at the start of their retirement. Their monthly benefit check amount is reduced accordingly. Still other retirees are cashed-out by the fund buying an annuity for them. The annuity company assumes the responsibility of providing a monthly check to the retiree until their death or until their spouse's death depending on the arrangement. Some retirees opt for a guaranteed number of checks, and understand that they will get every check no matter what their personal circumstances, but that the checks will stop eventually and they may outlive their money. The point of all this is any non-UPS retiree in any of these payout situations has in effect been paid off by the plan out of existing plan money at the time of their initial retirement. Such retirees are not an ongoing drain on UPS or even on the fund as a whole. Any Lump Sum payoff or Annuity payoff is, in effect, old news and has already been accounted for by the fund's actuaries who are routinely recalculating the fund's financial status and what benefits it can afford to pay, and under what conditions and assumptions. Any analysis of possible subsidy should exclude all these cashed-out retirees, just as non-vested retirees who are ineligible for any benefits at all must be excluded. - - - - - I hope everyone understands that pension matters are complicated enough to start with, and even more so with the numerous plans, each with there own set of features, plus the new pension law. It's hard for me or anyone to say anything definitive that will apply to all plans at all times. There will be unavoidable oversimplifications and exceptions to every rule. Oh, and pension stuff is really, really booring, too! - - - - - When evaluating a set of bonehead trustees who invested your funds assets in stocks or real estate or whatever, and lost a significant portion of your future retirement money, let's be fair. The markets usually bounce back partially shortly thereafter, so the loss isn't as big as first experienced. They shouldn't have had your funds at risk in the first place, but since they did, let's be accurate and recognize the net loss is not as bad as the initial loss. - - - - - If trustees, or anyone else, suggest that "changing demographics" are the reason your benefits are being cut, they are just trying to deflect your attention away from the fact that they lost a big chunk of your money, instead of making a big chunk of money on your money. The adverse demographic they point to the most is the dwindling number of active (contributing) plan members, and the increasing number of plan retirees, who cost the fund money with every benefit check they collect. The moment when the number of Retirees actually exceeds the number of Actives apparently has special mystical significance, like a full eclipse to the Druids. Some funds have passed this point. But so what? Remember, your account is an individual one (sorta, kinda) and is relatively independent of other accounts. Grouping all active accounts together into an Active Contributors group, and grouping all retirees into a Retirees Who Are Draining Our Assets Monthly group is interesting but of limited usefulness. Indeed, the whole purpose of the plan is for everyone to be an Active contributor for many years, build up a sizable account, then switch to Retiree and live off the money. The groupings are somewhat artificial. Imagine a really small fund, just a thousand 21 year old guys who all get hired on the same day, contribute to the fund at the same hourly rate, work 30 years, and all retire on the same day. The fund would initially come into existance to receive their first month's contributions, then assets would steadily grow monthly over the next thirty years (assuming no bonehead trustee investment advisors), with no retirees draining the fund. Then, everyone would file for retirement and slowly begin depleating the fund until it eventually went out of existance in an orderly manner having served its purpose. This is greatly oversimplified, but it illustrates that as long as the trustees and the actuaries do their job, and as long as the members are kept informed so they know what kind of retirement checks to expect, then it's OK for a fund to be lopsided in favor of Actives now and Retirees later. Just as the country has been steadily abandoning Unions for the last half century, so they are now abandoning Defined Benefit pension plans. Fewer want to join an existing plan, and no one wants to start a new plan. A fund with an "excess" of retirees is a shrinking fund and will be the norm from now on. This will psychologically make the trustees and plan sponsors feel uneasy, especially if they believe size matters. Note that when an active member retires the fund takes a double hit. First the fund looses the member's regular contributions. Second, the fund begins paying out benefits. Trustees must have mixed feelings when they see you walk in the door to file your retirement papers. - - - - - If a plan looses money through bad investing, the losses are distributed over everyone in the plan, except those who have already begun collecting retirement checks and those who have earned vested benefits. Trustees are forbidden by law to decrease retiree benefit levels once they have begun collecting. And trustees can not reduce vested benefits of active and inactive-but-not-yet-retired members. Trustees can, and probably must, reduce the future benefit accrual rates for any pension credits earned from that day foreward. They can also move the goal post further away so you have to work longer until you are eligible to retire. ( Social Security has also moved the goal post from 65 to 66 to 67 for younger workers.) Trustees are obligated to constantly rebalance the fund actuarily so future obligations are in line with assets and contributions and investment gains (or losses.) Trustees have a "fiduciary duty" to run the plan in the sole interest of the plan participants as a whole, so they spread out gains and losses over everyone that they can, legally. They also amortize everything, which is the spreading out over time. This way no one, or no group is singled out to bare the burden or reap the reward of a momentary gain or loss. That's the theory anyway. Spreading out losses in as many ways as possible also spreads the misery more thinly so no group will be so enraged as to sue the trustees. - - - - - Let's clarify that the individual account you have as an active member of the pension plan has some strings attached. First, you don't have a right to any of the money until you get vested. That takes five years; it use to take ten! Second, the money isn't collectible until you reach a certain age like 52 or 55 or 57 or 64 or 65 or whatever depending on the details of your fund rules. Third, if you are eligible to retire at the earlier ages, you will have your monthly benefit reduced accordingly. Other strings apply as well. Your money is comingled with everyone else's but your Pension Credit Account is seperate and keeps track. Your account is not actually denominated in dollars, it's in Pension Credits, which are convertible to dollars eventually, kind of like casino chips, except that Vegas at least doesn't lower the value of some of the chips as you walk toward the teller window. Pension trustees must rebalance the fund to keep it financially sound and in compliance with the law, so if the fund has troubles, you have troubles. "Pay attention to your pension." [/QUOTE]
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