From our Chairman Joseph Sellers, Jr.
Dear Participants, Local Unions and Employers,
When my fellow Trustees and I meet with our Members, Union officials, and Employers, the most common questions center on the National Pension Fund. Our active working Participants express concerns about subsidized early retirement benefits, like 55/30 and Special Early Retirement, while our retirees want assurances that their benefits will continue unchanged. Our Employers worry about unfunded liability. Continued contribution increases challenge everyone in our industry.
In responding to these questions and concerns, the Trustees stress that we work to protect benefits for today’s retirees and future generations of sheet metal workers. Toward this goal, earlier this month the Board of Trustees adopted a major structural change to NPF’s Plan of Benefits, (no, we have not changed or eliminated any early retirement subsidies); however, it will affect how benefits are earned for hours worked starting in January 2014. If you are already retired, these changes will not affect your benefit
As you know, the Pension Protection Act required the NPF to develop a Rehabilitation Plan that will enable the Fund to emerge from critical status by 2024. Federal law requires that the NPF annually report its progress toward emergence and it requires the Trustees to change the Rehabilitation Plan and its schedules to adjust to investment performance, hours of work, contribution income and several other factors.
Put another way, the Rehabilitation Plan evolves with changing conditions. Since it was adopted in 2008, the Trustees have modified it to adapt to, among other things, extraordinary investment losses in 2008, declining hours of work and the improved life expectancy of our Participants.
The Trustees want to do more than just meet legal requirements. We continuously work with staff and professionals on changes that we hope will improve and protect funding over the long-term. In this regard, let me repeat what the Trustees have stated publicly: “Everything in NPF is on the table.” The Trustees have looked at dozens of different approaches and will consider many more before NPF emerges from critical status. It is important to note that when we consider major changes, we also look for ways to phase them in to the extent possible.
Like virtually all mature pension funds, the monthly Employer contributions coming into NPF are not enough to cover the monthly benefit payments going out. This remains true even after several years of annual contribution increases required under the First and Second Alternative Schedules.
To change this situation, we all must work together and focus our efforts on increasing membership, market share and work hours. Until that time, NPF must draw monies from its investment portfolio to pay monthly pensions. As we have witnessed over the years, financial markets, including the stock market, heavily affect the NPF’s funding.
After extensive analysis, the Trustees have concluded that the NPF’s plan design should take into account the Fund’s reliance on financial markets. Therefore, starting with hours worked on and after January 1, 2014, all Participants working under any Schedule of the Rehabilitation Plan, other than the Default Schedule, will accrue benefits at a rate that reflects the Fund’s investment performance. Specifically, a Variable Benefit Accrual Rate (“VBAR”) will apply. VBAR is based on the average market value investment return for the three most recent years, as reported in the NPF’s Actuarial Valuation and Review. In general, the Actuarial Valuation and Review is issued in the fall of each year and it is based on actuarial and plan data as of the end of the preceding plan year (e.g., the January 1, 2013 Valuation will be received in the fall of this year, and will be based on December 31, 2012 data). For more, click here and continue reading on page 2.
Joseph Sellers, Jr.
Chairman, NPF Board of Trustees