From our Chairman Joseph Sellers, Jr.
CHAIRMAN’S MESSAGE MARCH 2016
Dear Brothers, Sisters and Industry Leaders:
Soon, we expect the formal certification from our actuaries that the National Pension Fund will remain in “endangered status” for 2016. This will be year three of the Fund’s certification in the “yellow zone” since its emergence from the red zone in 2014. Despite the current volatility of the stock market, long term projections show that the funded percentage of the Plan will increase over the next several years.
We are seeing an increase in the overall hours across the industry. This is good news for the Fund, our members, and our participating employers and is a trend we hope will continue to improve as we approach the spring and summer months.
Since the Plan emerged into endangered status, I often receive questions from our members as to how this change affects future benefits. In response we authored an article that was just published in the latest edition of the Journal - titled “Fill your pension buckets: Options and opportunities,” describing how benefits accrue, with an emphasis on accepting job opportunities to earn the pension benefits necessary to enjoy a comfortable retirement. For our members that are not close to retirement age, it explains that it doesn’t matter what Schedule you work under, but the importance of earning those years of credit in the Fund. For those approaching retirement, it reminds us to reach out to the Fund Office for guidance when accepting employment outside your contract area, especially those who may qualify for a 55/30 Pension. But as the article explains, travel if necessary to find work and to add those additional benefits to your “pension buckets.”
A couple months ago we announced the NPF’s Variable Benefit Accrual Rate (VBAR) would remain at 1.25% for 2016 hours. VBAR is determined based on the average investment returns of the previous three years as stated in the prior year’s actuarial valuation. For 2016, we used the average of the returns for 2012 (11.98%), 2013 (20.56%) and 2014 (6.12%), which is 12.89%. Based on the formula detailed in the Plan, when the average of the three years is equal to or exceeds 10%, then the VBAR is 1.25%. For previous Plan years, the VBAR was 1.25% in 2015 and it was 0.75% for 2014. This plan feature was designed to adjust benefits in reaction to the market. When returns are good, the VBAR is at the top of the scale. Likewise, lower returns will move the VBAR lower on the scale.
You may be hearing in the news about cuts to retirees’ pension payments. Some pension funds are submitting applications to the federal government seeking permission to cut pensions under legislation passed in December of 2014. These requests are limited to pension funds that are in the “red zone” AND are considered “critical and declining.” The NPF is not one of those plans and cannot reduce any pension payments under this legislation. We are not projected, long or short term, to enter the red zone.
Joseph Sellers, Jr.
Chairman, NPF Board of Trustees