Folks are talking pensions, an issue at the heart of the project labor agreement (PLA) debate. Following this 7/26 WSJ piece, yesterday Politco ran a plea for pension reform by Sheet Metal Workers International Association Union (SMWIA) President Michael Sullivan (“Time for true pension reform,” 7/29).
“It is clearly time to overhaul our current pension system.”
Suggestions on how to overhaul pensions?
“To do so will require careful analysis, thoughtful input and innovative solutions from diverse sectors of our economy. I believe the best way forward is a presidential commission, chaired by a high-level administration official whose task would be to recommend, within a two-year period, a new policy and legislative framework for ensuring long-term retirement security for all Americans.
Its members should represent a broad cross section of employers, participants, unions and benefit and investment professionals. The commission should investigate and recommend new forms of pensions in which risk is borne fairly by both participants and plan sponsors but in which a reasonable monthly benefit is also fully funded.”
Light on details, but it is early. Sounds sort of like a bailout that will be engineered by Big Labor’s hand-picked cronies to me.
So what is the cause of pension plan problems and why is there need for reform?
“Most workers saw their retirement accounts decimated by last year’s market meltdown. Just look at those folks who were planning to retire in 2010. One large 401(k) plan provider’s 2010 “target date” fund lost 41 percent in 2008, and most others lost at least 25 percent.”
[Readers, any idea which plan lost 41 percent and how about some numbers and details to support the definition of “most”?]
Of course! Wall Street is to blame.
While it is true and unfortunate that workers participating in union run multi-employer pension plans (MEPP) lost retirement savings in the market during the “financial meltdown” – as did workers with private 401(k)s and other investments – let’s investigate the pension fund assets of the SMWIA Union. After all, they are the ones calling for reform and posturing for a bailout.
It turns out that this plea for assistance by the SMWIA Union President is fitting because the Sheet Metal Workers National Pension Fund was in “critical status” or funded at less than 65 percent at the beginning of the 2008 plan year according to this March 2008 notice by the U.S. Department of Labor.
Given the financial market performance in 2008, it is safe to assume that their pension fund will be in worse shape and remain in “critical status” this year. (Stay tuned for the soon to be released 2009 notice).
The Sheet Metal Workers National Pension fund discloses the plan’s annual funding levels for plan participants here. The SMWIA union’s own pension fund documents indicate that on 1/1/2008, the fund was at just 52.2 percent funded.
So just three months after the Dow closed at an time high at 14,164 on 10/9/07, the pension fund took such a big loss in the stock market that the plan ended the year at 52.2 percent funded? Something doesn’t smell right.
And didn’t most of the financial meltdown happen in 2008?
So what kind of shape was the pension fund in at the beginning of 2007?
For 2007, the Plan’s “funded current liability percentage” was 39.27%, the Plan’s assets were $3,152,717,824, and the Plan liabilities were $8,028,794,382.
But on 10/3/2006, the Dow exceeded the 1/14/00 historical high of 11,723.
How about at the beginning of the 2006 pension plan year?
For 2006, the Plan’s “funded current liability percentage” was 38.85%, the Plan’s assets were $2,896,255,519, and Plan liabilities were $7,454,540,455.
The data on their pension plan’s performance demonstrates that Wall Street can’t be blamed for the troubles with the Sheet Metal Workers National Pension Fund – well, at least until the beginning of 2008. So what is the cause of the SMIA’s National Pension Fund’s sorry state of affairs?
There are likely a variety of reasons why the Sheet Metal Workers National Pension Fund has struggled throughout the most prosperous years after the financial slowdown of 2001. This probably isn’t the forum to discuss those issues (today), but I hope someone finds the truth.
So do poorly performing union run plans deserve a bailout? If so, which plans, how much and who will foot the bill? What will citizens, government and private industry do to support the retiring workforce that depend on these pensions?
With so many questions, one thing is certain. Given the Sheet Metal Workers National Pension Fund’s horrendous performance and management, you can’t blame contractors who employ sheet metal workers – and non-union sheet metal workers – for avoiding participation in this pension plan.
So why is President Obama encouraging government agencies to require that contractors and workers participate in these plans through a government mandated project labor agreement (PLA) via Executive Order 13502?
If you are interested in seeing if your trade’s plan is in financial trouble, the U.S. DOL has made these critical and endangered plan notices publicly available at http://www.dol.gov/ebsa/criticalstatusnotices.html.
You can look up union multi-employer pension plan statements (5500s) from previous years at www.FreeERISA.com.