Legislative Conference April 4, 2017 Washington D.C. Sheet Metal Workers National Pension Fund Update

Legislative Conference April 4, 2017 Washington D.C. Sheet Metal Workers National Pension Fund Update

NPF Update Status of the Fund Other Funds in the News Variable Benefit Accrual Rate (VBAR) Contribution Rates Organizing Tools Unfunded Vested Liability NPF Adoption Agreements Anti Discrimination Testing SHEET METAL WORKERS NATIONAL PENSION FUND 3

NPF Funding Plan Year 2016 2015 2014 2013 Valuation Date January 1 2016 January 1 2015 January 1 2014 January 1 2013 Funded Percentage 59.4% 59.3% 59.1% 57.4% Value of Assets $4,294,266,345 $4,140,279,634 $3,940,831,853 $3,711,928,315 Value of Liabilities $7,230,768,938 $6,987,384,126 $6,671,514,903 $6,463,106,428

Contrast Assumptions v. Experience Assumptions Experience 2015 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 Slight increase in participants Hours up about 4.7% Investment return -0.42% (market value actuarial basis) Contribution income up 12%

$ Billions Sheet Metal Workers' National Pension Fund: Credit Balance and Funded Percentage Projections Assuming 90 Million Hours/Year and 5.0% Returns through 2021 1.20 ProjectedYear-EndCredit Balance for Plan Years Beginning January1 1.00 0.80 0.60 0.40 0.20 0.00 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2016 2017 2018 2019 202021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 ProjectedFundedPercentage as of January 1 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 March 30, 2017 Based on the actual experience of 2016, the Plan is projected to enter the Green Zone in 2028, and is projected to meet the requirements of the Funding Improvement Plan.

Iron Workers pension cuts approved; retirees to get smaller checks Union pension fund plans 30 percent cut to retiree benefits Teamsters Pension Plans Seek Massive Cuts to Retirees to Stay Solvent

Multi Employer Pension Reform Act of 2014 Provided tools for seriously critical funds to remain solvent. One tool: cuts to benefits meant to be less than the cuts pensioners would realize with the PBGC.

Automotive Industries Pension Fund Bricklayers & Allied Craftsmen Local No 7 Pension Plan Bricklayers And Allied Craftworkers Local 5 Pension Plan In review Withdrawn Withdrawn Central States, Southeast And Southwest Areas Pension Plan Denied Iron Workers Local 17 Pension Fund Ironworkers Local 16 Pension Fund Approved Denied New York State Teamsters Conference Pension & Retirement Fund In review Road Carriers Local 707 Pension Fund Denied Teamsters Local 469 Pension Plan Denied Teamsters Local 469 Pension Plan Withdrawn United Furniture Workers Pension Fund United Furniture Workers Pension Fund A Withdrawn In review Western States Office and Professional Employees Pension Fund In Review

NONE OF THESE TOOLS ARE AVAILABLE TO THE NPF WE CANNOT MAKE PENSION CUTS We are not critical and declining. We are not red zone. We are endangered, yellow zone. We are not expected to become insolvent. We have a funding improvement plan which projects us to be green by the end of the funding improvement period.

Variable Benefit Accrual Rate - 2017 Plan Year Annual Investment Return 2013 20.56% 2014 6.12% 2015-0.42% 3 year average 8.75%

VBAR Formula 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.

VBAR From the Start 2014 VBAR 2015 VBAR 2016 VBAR 2017 VBAR 2018 VBAR 2016??? 2015-0.42-0.42 2014 6.12% 6.12% 6.12% 2013 20.56% 20.56% 20.56% 2012 11.98% 11.98% 11.98% 2011-1.72% -1.72% 2010 14.48% 24.74 30.82 38.66 26.26??? 3 Year Avg 8.25% 10.27% 12.89% 8.75%??? VBAR 0.75% 1.25% 1.25% 1.00%???

Contribution Rates First Alternative: 7% Increase Required in 2017 Second Alternative: 3.5% Increase Required 2017 Default: No increase required in 2017

Contribution Rates 2018 and 2019: Trustees have determined that, barring any catastrophic events impacting the plan, there will be no mandated increases. Beyond 2019: TBD

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. Do not exclude newly hired employees from participation. Increasing the number of years in a training program with a graduated contribution rate scale is a decrease in contributions that requires Trustee action. Increases should be retro to the renewal date or it is a decrease and must be presented to the Trustees

Organizing Tools Past Service Free Look Owner Member Exclusions

Past Service Credit Past Service Credit can be awarded (up to 10 years) provided the following conditions are met: Minimum NPF Contribution Rate is 50 The Employees must be working with the new employer in Covered Employment when the Employer begins participation, or The Employees must have been employed with the new Employer in the 24-month period before the new Employer s Contribution Date and be working in Covered Employment with another Contributing Employer on the new Employer s Contribution Date. Past Service is equal to $10 per year of award. Employer Verification form must be submitted.

Owner Member Exclusions Trustee Resolution to allow new Owner Members to participate in the plan but exclude contributions on themselves for one year. OM s may get pension credit for purposes of vesting and eligibility.

Withdrawal Liability Required by ERISA Triggered when the obligation to contribute ceases Construction Industry Exemption De Minimis Rule Triggers Exit Contributions

Free Look THE TRUSTEES HAVE DETERMINED THAT FREE LOOK IS IN EFFECT FOR 2017 A BRAND NEW Employer who was approved for the Free Look provision, signed a CBA, and began contributing in 2015, 2016, or 2017 will not be assessed withdrawal liability if its obligation to contribute ceases w/in 48 months. CBA must reflect acceptable provisions for NPF contributions, adherence to the Trust Document, and internet payment for submission of contributions. If an Employer s obligation to contribute ceases within the Free Look period, any Past Service Credit earned as a result of service with this Employer is cancelled by operation of law. Trustees will decide each year if Free Look will be available. However, 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.

Employers Using These Tools Free Look Owner Member Exclusions 2015: 4 Employers Approved 2016: 11 Employers Approved 2016: 4 Employers Approved 2017: 2 Employers Approved 5 Pending Requests 2017: 1 Pending Request

Unfunded Vested Liability The December 31, 2015 Withdrawal Liability Valuation establishes the basis for WDL for withdrawals that occur in the 2016 Plan Year. 2014: $4.41 billion 2015: $4.86 billion Increase: $449 million

Unfunded Vested Liability The Long Term Interest Rate Assumption used for Funding is 7.5%. The 2015 return was 0.42% Other demographic changes (i.e. more or fewer deaths than expected) also can impact the UVL. PBGC Interest Rate Changed for both short term and long term. 3.10% and 3.29% To 2.46% and 2.98% Lower Interest Rates = Higher Liabilities

Unfunded Vested Liability UVL @ 12/31/14 $4.407 Low Investment Return $176 Change in PBGC Interest Rates $197 Other Changes (Demographics) $76 Total Changes $449 UVL @ 12/31/15 $4.856

Financial Accounting Standards Board (FASB) Disclosure Information for Contributing Employers http://www.smwnpf.org/downloads/forms/2016_fasb_disclosure.pdf EIN 5% Disclosure Zone Status Significant Changes 28

NPF Adoption Agreements The NPF was established in May 1966 to provide a defined benefit plan to collectively bargained employees. Adoption Agreements are Executed when no CBA is applicable to cover: - Local Union Officials - Health and other Benefit Fund Administrators - Apprentice Coordinators and Part time Instructors Employed by a JATC

Participation under an NPF Adoption Agreement Alumni Only former sheet metal workers that worked in Covered Employment under the Plan. Alumni and Non-Alumni (excludes employees that are covered under a collective bargaining agreement to which the Employer is a party e.g. clerical employees covered by an OPEIU agreement) Other exclusions include Part-time hourly (JATC) What about the week that they travel for training? Trustees, warden, conductor, steward, staffing for elections or picketing, President or Recording Secretary (not currently working fulltime for the Union).

Contribution Rate(s) under an NPF Adoption Agreement The single Contribution Rate in effect under the Collective Bargaining Agreement and any renewal, modification, or amendment of such successor Collective Bargaining Agreement. Such rate shall apply to all Covered Employees or the Employer. The highest Contribution Rate in effect in the Covered Employee s Home Area as determined by the Collective Bargaining Agreement.

Non-Discrimination Testing Requirement of qualified plans to ensure that the benefits, rights, and features of a plan do not discriminate in favor of highly compensated employees. HCE in 2017 is an employee who earned $120,000 or more in 2016 Required to do this testing every three years for employers who employ: Non Bargained Non Alumni HCE We will need your help to identify if your Local Union should be included in testing and to gather applicable data.

LWOOD@SMWNBF.org DELKINS@SMWNBF.org BOT@SMWNPF.ORG WWW.SMWNPF.ORG 800-231-4622