Western Conference of Teamsters Pension Trust

Transcription

1 Western Conference of Teamsters Pension Trust An Employer-Employee Jointly Administered Pension Plan - Founded 1955 Office of the Co-Chairman/Secretary 2440 Camino Ramon, Suite 325 San Ramon, CA (925) Fax (925) rickdodge@att.net June 2, 2015 RE: Annual Employer Letter Describing Key Pension Trust Activities Dear Contributing Employer: Trust's 60th Anniversary 2015 is a special year in several respects for the Western Conference of Teamsters Pension Trust (Plan). It marks 60 years since the Plan was established in 1955, when representatives from the Northwest Brewers Association in Seattle, Washington and several unions affiliated with Joint Councils Nos. 28 and 37 developed the Plan. Since its origin, the Plan has grown from a few hundred to more than 580,000 participants and retirees. Financially, the Plan started with contributions equal to ten cents an hour, and since then, has grown to assets totaling almost 37 billion dollars. Building on the successes of their trustee predecessors, the Employer Trustees feel the WCTPT is in a strong and sound financial position and is poised to perform very well over the foreseeable future. As described more fully below, we see positive improvements in several areas that, taken together, demonstrate the continued strength and stability of the Plan: solid short and longer term investments returns, an improving Pension Protection Act (PPA) funded percentage, a reduction in overall withdrawal liability due to the Plan's decreasing unfunded vested benefit liability, and an increase in the number of companies and participants joining the Plan. Let's look more closely at each of these key factors Employer Letter Page 1 50

2 Improvement in PPA Funded Status In my annual letter that I sent last year to employers contributing to the Plan, I emphasized the continued strength of the Plan's Pension Protection Act (PPA) funded percentage status. The most recent Annual Funding Notice that was provided to each employer last month traces the positive trajectory in that ratio from 90.1% as of January 1, 2013 to 90.7% as of January 1, And last year's results reflect yet another increase in this very important measure to an estimated 91.9% as of January 1, Consequently, the Plan will remain in the PPA Green Zone this year. We take a great deal of pride in this fact because the Plan has remained in the Green Zone every year since the PPA established this ranking system for pension plan funding. Your Employer Trustees remain fully committed to taking the necessary steps to maintain and improve the Plan's funded percentage Financial Investment Results Although 2014 was a much more challenging investment year than 2013, the Plan's discretionary assets ended 2014 with a 7.2% return. Once again this return exceeds the Plan's actuarial earnings assumption. Over the last five years, the Plan's market valued assets have returned on average more than 10% per year, and 8.4% over the past 20 years! Specifically, last year saw strong absolute performance returns from domestic enhanced index and active equities at 14.6%, real estate at 13%, risk parity at 7.2% and fixed income at 7%. All handily beat their benchmarks. The only significant weak performers in absolute returns were non-us equities and infrastructure, both of which suffered from the sharp fall in the Euro-US dollar exchange rate. Reduction of Underfunding for Withdrawal Liability Assessments As a result of the Plan's continuing strong investments returns and realistic benefit formulas, the amount of our Unfunded Vested Benefit Liability (UVBL) is estimated to decrease by approximately one billion dollars. This is a significant development for participating employers because the UVBL is used to determine withdrawal liability (as the UVBL decreases, withdrawal liability exposure decreases). In percentage terms, a one billion dollar decrease amounts to an 18% decline in the UVBL from the prior Plan year. Should your company choose to obtain a withdrawal liability estimate (i.e., its share of the UVBL), you will find, in all likelihood (assuming that your company's contribution rates and contribution base units (i.e., hours) have remained relatively stable), that the estimate of a potential withdrawal liability will be lower, perhaps significantly lower, than you have seen in the past several years. We remain cautiously optimistic that this trend, too, can continue. Withdrawal liability estimates for the current Plan Year will be available in late October of this year. There is no charge for requesting such an estimate Employer Letter Page 2

3 It is interesting to highlight the fact that the Plan's actuary, Milliman, recently released its spring 2015 Multiemployer Pension Funding Study. One of its major findings was that the aggregate market funded percentage for multiemployer pension plans in the United States was 80%. By comparison, the market funded percentage for the Plan is expected to exceed 90%, which is significantly higher than the national figure. We hope that this trend in funding improvement will continue in 2015 and beyond, and there are reasons to be optimistic, subject always to the impact of investment market returns and other factors that affect the Plan's funded status. MPRA On an annual basis since 2010, the Plan has dedicated itself to preparing and presenting to U.S. congressional representatives and committees information describing the strengths of the Plan as well as information on legislative initiatives that could affect the Plan. We offered testimony and submitted comments to appropriate congressional committees about the need for the reauthorization of the Pension Protection Act that was slated to expire on December 31, 2014, and we will continue to work with congressional leaders and governmental agencies as we have done in the past to provide the type of assistance that is designed to enable them to develop legislation that would strengthen the entire multiemployer pension system. Last December, Congress passed, and the President signed the Omnibus Spending Bill that included a section entitled the Multiemployer Pension Reform Act of 2014 (MPRA). This section makes major changes to the funding and withdrawal liability rules and includes a number of technical amendments to the PPA zone rules that were sought by the Plan. Several major changes include the following: extending the Pension Protection Act (PPA) indefinitely, increasing the Pension Benefit Guaranty Corporation premiums for multiemployer plans from $12 to $26 per participant this year, and amending the Employee Retirement Income Security Act of 1974 (ERISA) to allow for the reduction of retiree benefits in limited and specifically defined circumstances for deeply troubled plans. Please note that MPRA will not reduce retirement benefits of any retiree or active participant under the Plan. We have never been deeply troubled, seriously underfunded or in critical or endangered status. As I have indicated above, this Plan has always been in the PPA's "Green Zone", and our funding level remains strong and has been steadily improving. While we will be monitoring MPRA's impact in general, rest assured 2015 Employer Letter Page 3

4 that its more controversial provisions do not affect the Plan benefits of your active employees and retirees. Plan Website and Webcast One of the strengths of the Plan is the commitment by Trustees to ensure that every aspect of Plan operations reflect the highest degree of transparency. This is accomplished in a variety of methods. One method in particular is the maintenance of a Plan website at that can be accessed by pension participants, participating employers and the public at large. Active and retired Plan participants can obtain a wealth of information about the Trust, print out forms and even examine a sample personal benefit statement. Similarly, Employers have access to any number of Plan documents and publications available on the website. Documents include the WCT Pension Plan Document, Summary Plan Description, Agreement and Declaration of Trust and Form In addition, a specially designated "Employers" tab on the Home Page of the website has available other features and resources. Last year the Trustees determined that one new method for the Plan to expand its communications efforts was to develop a webcast that would furnish a financial and funding update to unions, active and retired trust participants, participating employers and other interested parties. To this end we prepared a webcast that was presented on November 13, Topics that were covered included the latest Plan financial information, Plan investment results, actuarial highlights and legislative developments. Nearly 350 employers and local unions signed up for the webcast. We have received numerous comments about the value of this webcast, and we have decided to utilize this communication medium regularly in the future. A recording of this webcast can be downloaded on the Plan website at Growth in Contributions and Plan Participation Of all our improving statistics during 2014, perhaps the most compelling is the growth in employer contribution dollars. Our 1400 plus employers provided more than 1.5 billion dollars last year, an increase year-over-year of 7.2%. For a Plan that normally sees yearly increases in the 3-4% range, this number is particularly exciting. It resulted from three key factors: (i) renewed labor agreements with higher hourly rates; (ii) more hours being worked, in general, as the economy improves; and (iii) new groups choosing to bargain into the WCTPT for the first time. In fact, the Plan has added over 4,700 NEW participants from new bargaining units over the past three years. We know of no multiemployer pension plan that can match this growth. It says a great deal about the commitment of our employer community to the work being done by our Trustees and we deeply appreciate it Employer Letter Page4

5 New Employer Trustee In 2014, the Employer Caucus elected a new trustee to the Board, Rick Porter, Director of Industrial Relations for ABF Freight System, Inc. Rick replaced Al Carder who resigned. Rick has over 35 years of experience in the unionized transportation industry which has included the human resources arena and, particularly, labor relations and the negotiation of collective bargaining agreements. Impact of New Units Out of the West Until recently, the Plan had limited participation to those companies and organizations that have collective bargaining agreements covering employees within the 13 Western states. In 2013, this changed when the Trustees amended the Plan to allow bargaining units located outside the West to enter the Trust provided that certain criteria are met before being allowed to participate in the Plan. Since this change, over two dozen units from outside the West have joined the Trust resulting in the addition of 655 new bargaining unit employees. This growth will help the Trust to achieve its objective of increasing the employer contribution base, which will help to ensure that we continue to grow and remain healthy. Strength of the Plan I am pleased to be able to report that the Plan continues to maintain a healthy and stable financial status. Indeed, this is an accomplishment that many other multiemployer pension plans are not able to duplicate. One of the long-term objectives set by the Trustees is a commitment to grow the Plan in a prudent and practical way, while protecting financial integrity and the Plan's funded status. The Trustees, staff and Plan service providers are committed to exploring new ways of improving the manner in which the Plan is operated. We will continue to monitor Plan activities and policies and make appropriate fiduciary decisions, transparent in every respect, to keep the Plan strong. It has been a great year, and 2015 promises more improvement in our key financial and actuarial metrics. Please do not hesitate to contact me to discuss any Plan related matter. Best Regards, ~If~ Richard L. Dodge Chairman, Employer Caucus 2015 Employer Letter Pages

6 I would appreciate it if you would ensure that this letter is forwarded to your main office and to the individual who is responsible for your organization's Human Resources and/or Labor Relations responsibilities. MAILING LIST UPDATE To add individuals(s) to the mailing list of those who should receive important communications from the Chairman, or to make changes to the contact information that we have on file, please send an with the information below to Melissa Lehto at or mail this form to: Western Conference of Teamsters Pension Trust Office of the Chairman - Employer Caucus Attn: Melissa Lehto 2440 Camino Ramon, Suite 325 San Ramon, CA D Add D Change D Delete Company Name: ~ Address: ~ City: State: Zip: 2015 Employer Letter Page 6