NPF Update April NPF Apr

Transcription

1 NPF Update April 2015 NPF Apr

2 Recap 2014, thru March 31, 2015 In 2014, NPF emerged from critical status into endangered status. The 2014 funded percentage is 59.1%. Rolled out Variable Benefit Accrual Rate (VBAR). VBAR for 2014 was.75%, for 2015 it is 1.25%. Issued Funding Improvement Plan (FIP) w/3 Schedule Options. MEPRA became law in December Preliminary actuarial market value return for 2014 is 5.8%. Actuary has certified that NPF is in endangered status for Actuary has updated the mortality assumption for Jan 1, Free Look may be offered to Brand New Employers that sign up in 2015, just 2015 for now. NPF Apr

3 NPF Funding Plan Year Valuation Date Funded Percentage Value of Assets * Value of Liabilities* January 1, 2014 January 1, 2013 January 1, % 57.4% 56.7% $3,940,831,853 $3,711,928,315 $3,545,634,566 $6,671,514,903 $6,463,106,428 $6,248,255,880 Information from 2014 ANNUAL FUNDING NOTICE being sent to everybody this month. NPF Apr

4 Contrast Assumptions v. Experience Assumptions Participant count as of 2013 will remain flat thru 2026 Hours will be the same as 2013 Investment return 7.5% CBA s that clearly spell out increases are counted Experience 2014* Slight increase in participants Hours up about 1.8% Investment return 5.8% (market value actuarial basis) Contribution income up 9% *Subject to confirmation in Jan 1, 2015 Valuation. NPF Apr

5 What s the diff? Critical v. Endangered? Because NPF is in endangered status it cannot adjust benefits retroactively such as subsidized early retirement benefits that have been earned. Note, however, that all changes made in critical status are permanent. If a CBA adopts another Option, e.g. Second Alt or Default, then benefits will adjust on Pension Credit earned after the change. However, if NPF does not make scheduled progress then it must resort to rate increases or prospective benefit reductions. NPF April

6 Target under the FIP The purpose of the Funding Improvement Plan is to increase NPF s funded percentage over the course of its funding improvement period by one-third of the starting funded percentage and 100%. In short, the FIP is designed so that the Plan s funded percentage should be in the mid 70% range by the end of the 2026 (i.e., the end of the funding improvement period). NPF Apr

7 Illustration: 2015 Variable Benefit Accrual Rate (VBAR) of 1.25% Plan Year Annual Investment Return year average 10.27%

8 VBAR Formula Download Trustees VBAR Announcement Letter IF, the three-year average market value investment return percentage reported in the preceding Plan Year s Actuarial Valuation is: THEN, the VBAR rate of Accrual for the Plan Year will be: 10% or higher 1.25%* 8.5% or higher, but less than 10% 1.0%* 6.5% or higher, but less than 8.5% 0.75%* Greater than 0%, but less than 6.5% 0.5%* 0% or less 0%* *FOR 55/30 CONTRIBUTION RATE, THE ACCRUAL IS 70% OF AMOUNTS LISTED. NPF Apr

9 MEPRA The Multiemployer Pension Reform Act of 2014: Changes NPF s FIP Schedule to address CBA s that might run longer than December 31, 2018; Contribution Rate increases, 2015 and forward, that are required under Alt Options, WILL NOT, by themselves, increase an employer s withdrawal liability; PBGC premiums have doubled, with more to come; NPF is NOT a critical and declining plan and therefore, IT HAS NO AUTHORITY/LEGAL RIGHT TO reduce retiree benefits in pay status. Download announcement on Pension Reform Act NPF Apr

10 Funding Improvement Plan & Schedule Because NPF is in endangered status (the yellow zone), it issued an FIP & Schedule. Benefit adjustments made in critical status are permanent. The FIP Schedules provide 3 options: (1) Default Option (2) First Alternative Option 7% annual increases (3) Second Alternative Option 3.5% increases Don t make increases when due? -- prospective loss of subsidies & optional forms for Contribution Hours after increase not made. Download 2015 Funding Improvement Plan Schedule

11 Increases under First Alternative and Second Alternative currently go thru CBA s that run longer than December 31, 2018 will be bound by whatever the options require for contributions and/or whatever benefit adjustments apply. NPF Apr

12 Breakdown of Schedules as of 2014 by Percentage of Active Participants NIC.60% Default 23.80% First Alternative (with 55/30) 37.30% First Alternative (no 55/30) 38.30% Not included in chart - less than.1% participate in Second Alternative NPF Apr

13 CONTRIBUTION RATES & the FIP DO NOT LOWER YOUR NPF RATE. It is only possible to lower it, if the Trustees give advance approval. New-Work-Contribution-Rates require Trustee approval. If the bargaining parties or a unit adopts something besides the First Alternative, do it before the rate increase is due - by formal adoption. If a rate increase does not come in, unit can be defaulted (can t guarantee to catch all your due dates). Increases should be retro. NPF Apr

14 Comparison of Funding Improvement Plan (FIP) Options Get this handout! Major Features Default Option First Alternative Option Second Alternative Option Contribution Increase No Yes, annual 7% Yes, annual 3.5% Accrual for Non 55/30 Locals VBAR VBAR VBAR Accrual for 55/30 Locals (remember the 70/30 split) VBAR less 30% offset VBAR less 30% offset VBAR less 30% offset 55/30 Pension No Yes No 60/30 Pension No N/A Yes Special Early Retirement No Yes No Age 62 Pension No N/A Yes Standard Early Retirement No Yes No Unsubsidized Early Retirement Pension Yes, applies to all Participants that retire before age 65. No Yes (unless he/she qualifies for the Age 62 Pension) 60-Month Guarantee Applicable to Lifetime and 50% J&S Pop-Up Feature (Reversion available on all J&S Options) No Yes Yes No Yes Yes NPF Apr

15 Types of Early Retirement Pensions Creating the Buckets First Alternative Option 55/30 Pension Special Early Retirement Pension Standard Early Retirement Pension Second Alternative Option 60/30 Pension Age 62 Pension Unsubsidized Early Retirement Pension Default Option Unsubsidized Early Retirement Pension NPF Apr 2015 Calculating a Pension 15

16 Example (actual experience will be different!) As of 12/31/2013 John earned 28 years of Future Service Credit under the First Alternative Schedule. His Home Local participates in the 55/30 Pension. Based on this credit alone, he qualifies for Special Early Retirement of $2500 payable at age 62. John is unable to find work in his Home Local and travels to another Local Union. In 2014 and 2015, he works in a Local Union that is under the First Alternative but does not participate in 55/30 and in 2016 he works under the Default Option. In 2017 he decides to retire at age 58. NPF Apr 2015 Calculating a Pension 16

17 John s Normal Retirement Benefit FIRST Alt $2675 $2500 from Home Local and $175 from traveling local Second Alternative Option $0 Default Option $75 NPF Apr 2015 Calculating a Pension 17

18 What Enhanced Early Retirement Subsidies Apply to Benefits earned under the First Alternative? 55/30 Pension Have earned a minimum of 30 years of Future Service Credit; Worked at least 3,500 hours at the 55/30 Rate in the five calendar years prior to retirement; Have earned 5 of his last 10 years of Pension Credit under a 55/30 Rate; and Never worked non-sig (limited exception) Special Early Retirement Pension Have earned a minimum of 10 years of Pension Credit; and Worked at least 3,500 hours in the five calendar years prior to retirement. NPF Apr

19 John s Work in Covered Employment 2017 John Retires ,800 hrs. under the Default Option (without a 55/30 Rate) ,100 hrs. under the First Alt without 55/30 Rate hrs. under the First Alt without 55/30 Rate ,100 hrs. with his Home Local that is both First Alt & 55/30 Rate ,100 hrs. with his Home Local that is both First Alt & 55/30 Rate NPF Apr

20 At age 58 - what does John qualify for? When reviewing his work in Covered Employment the Fund determines that John did not earn the required 3,500 hours at a 55/30 Rate. As a result all benefits earned under the First Alternative will be based on Special Early Retirement Pension age reductions. $2675 x 76% under 1 st Alternative Special ER w/ pop-up option on J&S and 60-Certain Payment $0 under 2 nd Alternative Unsubsidized ER w/ pop-up option on J&S and 60-Certain Payment $75 x 48.48% under Default Option Unsubsidized ER w/o pop-up or 60- month Certain Payment $2,033 $0 $36.36 NPF Apr 2015 Calculating a Pension 20

21 John s Pension John qualifies for a Lifetime Benefit of $2,070. NPF Apr 2015 Calculating a Pension 21

22 A Local first completes and submit a Questionnaire. SEND COMPANY INFO TO THE FUND BEFORE YOU SIGN! A BRAND NEW Employer must sign and start contributing in Such an Emloyer will not be assessed withdrawal liability if it goes non-union w/in 48 months. CBA must reflect acceptable provisions for NPF contributions (avoid a kick-back, send draft to Fund Office before its executed, consummated etc.). If an Employer goes non-union within the Free Look period, any Past Service Credit earned as a result of service with this Employer is cancelled by operation of law. Free Look will only be available in years in which, as of the end of the previous year, the ratio of assets to annual benefit payments is at least 8 to 1. Unless the Fund tells you in writing that Free Look is available in 2016, don t offer it after December NPF Apr

23 from page 34 of the SPD Download 2014 Summary Plan Description NPF Apr

24 THE TERM SHEET METAL INDUSTRY DOES NOT INCLUDE (a) employment as a bona fide Salted Organizer, as certified in writing to the Fund Office by the SMWIA; provided, however, that any single period of employment with the same employer as a bona fide Salted organizer shall not exceed 12 months; (b) employment in a related building trade; provided, however, that such employment is on referral by and authorized by the Union; (c) employment for a Contributing Employer in a management position not covered by the Collective Bargaining Agreement; (d) [omitted] (e) working after August 31, 2011 but before January 1, 2021 for, or on behalf of, a governmental entity in a position that primarily involves compliance with the requirements of any federal, state, county, or municipal law, regulation, rule, or ordinance pertaining to construction, building, or facilities codes or standards, or pertaining to the terms or conditions of employment, work, or labor. (f) work performed in the State of California by an apprentice who was dispatched by the Local Union or by an affiliated Joint Apprenticeship and Training Committee (JATC) (or similar entity) pursuant to California law, which has been substantiated by sufficient documentation from the apprentice s Local Union or JATC (or similar entity). NPF Apr

25 Document the referral. Check for Intertrade Reciprocity. A member working for another union trade will be deemed working in nonsig employment, unless it is on referral from the Local. Jump thru the salting hoops Salts must be SMART bona fide. NPF Apr

26 Internet Payment System (IPS) NPF has enhanced electronic reporting capabilities: On behalf of the National Benefit Funds, NPF continues to encourage Employers to begin reporting on the IPS. The IPS is hosted on: click on Employer Login Contact the Internet Payment System Coordinator Joshua R. Todd Phone:

27 NOTICES, MAIL, ETC. JUST TO NAME A FEW Notice of Critical Status Annual Funding Notice Funding Improvement Plan and Schedules (Union & Employers only) Summary of Material Modifications Notice to Separated Vested Required Mandatory Distribution Notices NPF Apr

28 End NPF Apr