Does anybody really know if the Western Conference fund is really 100% funded then why were there be a 30% reduction in future accruals ? . . .
Western Conference of Teamsters Pension Fund:
Net Plan Assets: $26,318.9 million
RPA 94 Current Liability: $31,508 million
Funded Status: 93%
Total Contributions: $1,068.7 million
Underfunding Multiple: 1.0x
Funded Status is computed by taking the Net Plan Assets and dividing them by 90% of the RPA 94 Current Liability.
Funded Status = NPA divided by (RPA 94 Current Liability times .90)
At least that's how Moody's calculates it, and they don't have an axe to grind. Others may calculate the funding ratio differently. Moody's explains their methodology in this August 2006, 16-page Adobe PDF document where they analize all the major pension funds. . . .
http://www.ifebp.org/pdf/moodysmethodology.pdf
Skip to pages 14-15 to compare your fund with other Teamsters and trucking industry funds. By Moody's formula, the Western Conference of Teamsters Pension Fund is 93% funded (using 2004 data.) Meaning, for every $100 of future benefits the fund is obligated to pay, they only have $93 on hand to pay them with.
An Underfunding Multiple of 1.0x means it would take one extra year's worth of employer contributions (above and beyond the normal, scheduled employer contributions) to bring the fund up to the 100% funding level.
Also, there are many assumptions that go into manageing a pension fund. If you assumed you would earn, say, 8% on you assets for the year, and you only earned 7%, you just came up short by over $263 million dollars!!! What if you did this several years in a row, or what if you only earned 6% or 5% or actually lost money? If, say, you expected to earn 8%, but actually lost 8%, you are 16% short. That's over $4.2 billion. You've got some "splainin" to do.
You could also be wrong on the number of participants who will get vested, or die, or retire early, or the number of companies who will go out of business, and other factors, as well. A pension plan must balance itself not just for the current year, but for many years to come. Many funds are in trouble. Even the ones that seem financially sound, may have problems that are known today, but which won't surface until several years into the future. Actuaries determine if a fund has a future funding problem, and the trustees must take action now to correct it.
The new pension law requires that funds not only have a plan to cure their known funding deficencies, but that they avoid future funding shortfalls as well.
Note that fund trustees can not usually cut benefits already earned, so cuts must be made in future accruals. This other well-intentioned law (ERISA) has the effect of making cuts all the more severe in future accruals, where they are concentrated, because the cuts can't be spread over all participants equally.
The Western Conference of Teamsters Pension Fund is probably currently funded at a better rate than the 93% cited above because of the benefit cuts that have reduced it's liability, and better investment performance that has increased net assets. The fund's 2005 Form 5500 should be available online soon at Free Erisa dot com.
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