Approval of Rescue Plan is a Necessity

The current Pension Plan has $15 million and is paying out $3 million every year. It will run out of money sooner than you think – possibly in as little as 10 years. Failing to approve the Rescue Plan puts a majority of those receiving or eligible to receive their pensions at a risk for dramatic cuts far greater than what the trustees have proposed. Under the proposed options those who are receiving disability benefits or are age 80 and over are protected from pension cuts. Every cut that could be made prior to this Rescue Plan has been made. There is nothing left to cut.

The Rescue Plan Is Balanced

The trustees have worked hard to ensure the proposed payouts are as fair as possible among participants and beneficiaries. The cuts will get worse if the Rescue Plan isn’t approved as quickly as possible. As the sample illustrations demonstrate, you can see that there is no single, simple solution. 

The Rescue Plan Must Be Approved Now

We're here today because of a number of different factors. Any delay in Rescue Plan approval will end up increasing future proposed cuts up to when the government’s Pension Benefit Guaranty Corporation (PBGC) steps in, putting all benefits at risk. The current level of PBGC guarantee could decrease in the future due to a large number of pension plans requiring help. (Check out this article from the Wall Street Journal for more information.)

Your Union Brothers and Sisters and Their Families Need You

Approval of the Rescue Plan is the only way to ensure that everyone receives his or her benefits at the highest possible rate to keep the Pension Plan going for the next generation. At its current pace, the Pension Plan will exhaust all funds in about 10 years.

Approval of the Rescue Plan will help to ensure continued participation of working members of the local union and will stabilize the Pension Plan for the future. Learn more below.

 

Where We Stand: 1.3 percent of your total lifetime contributions

After an extensive amount of number crunching, research and debate, the Bricklayers & Allied Craftsmen Local No. 7 Pension Plan Board of Trustees has settled on a fair and balanced Rescue Plan based on 1.3 percent of your total lifetime contributions to the Pension Plan.

This option:

  • Includes a credit on previously non-credited money since 2006
  • Cannot exceed your current benefit level
  • Includes current adjustments for early retirement or optional forms of benefit

You can rest assured that the Rescue Plan always provides the same or more than the minimum amount required by the Pension Benefit Guaranty Corporation (PBGC) – and will NEVER be lower than the amount guaranteed by the PBGC, were we to do nothing and let the government step in. Furthermore, those who are retired under Pension Plan disability rules or are age 80 or over are protected from any cut – an option not available under the PBGC.

It should be noted that any plan put forth (PBGC or otherwise) would ask a small number of members to take a significant cut and a majority of participants to make some sacrifice. But in the end, it all adds up to a Pension Plan that remains solvent for you and all your union brothers and sisters.

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A Closer Look: What It Could Mean To You

Under the proposal, the benefits of four groups of participants will not be cut or changed:

  1. Participants, retirees, and beneficiaries who are age 80 or over at the time the cuts are made (only partial cuts can be made for those who are between ages 75 and 79 at the time).
  2. Participants who were disabled under the terms of the plan at the time of their initial retirements.
  3. Participants whose benefits are already less than 110% of the PBGC-guaranteed benefit level at the time the cuts are made.
  4. Participants whose benefits are less than the proposal’s targeted amount (i.e., less than 1.3% of total contributions made on each participant’s behalf).

In the first group, 76 participants will be age 80 or over by May 2017 when the benefit cuts are scheduled to be made. Benefit levels for those age 80 or over vary widely, ranging from under $50 per month to a few participants receiving over $3,000 per month. The average benefit level for the first group is about $775 per month.

In the second group, three participants were disabled at the time of their retirements. Again, their benefits cannot be cut.

The third protected group is comprised of any member whose benefit is already less than 110% of the PBGC-guaranteed benefit level. This group includes those members whose benefits are less than $17 per month for each year of service. There are 16 retired members in that group. There are 25 active members and 35 inactive members not in payment whose benefit will not be reduced due to the 110% of PBGC limit.

The fourth group includes members whose benefit levels are less than the targeted amount of 1.3% of their employers’ total contributions. This limit primarily impacts active members who have worked under the plan provisions in effect since 2006. There are 47 active members and 26 inactive members not in payment whose benefits will not be reduced to the 1.3% of contributions formula.

Here are a few examples based on the current estimates:

Retiree: 63 years old

Years of Service 29
Current Benefit $1,574
PBGC $1,037
Rescue Plan $1,140

Widow: 71 years old

Years of Service 27
Current Benefit $854
PBGC $715
Rescue Plan $787

Inactive: 59 years old

Years of Service 6
Current Benefit $288
PBGC $215
Rescue Plan $236

Active A: 51 years old

Years of Service 11
Current Benefit $526
PBGC $393
Rescue Plan $526
+11 Years $800

Active B: 32 years old

Years of Service 7
Current Benefit $142
PBGC $126
Rescue Plan $142
+11 Years $800

Retiree: Between Ages 75-80 on May 31, 2017

Years of Service 21
Current Benefit $1,697
PBGC $751
Benefit before adge adjustment $826
Rescue Plan w/age protection adjustment* $913
*Learn more about the formula.

The following is a chart showing the size of the proposed benefit cuts and the percentage of members whose benefits would be impacted. This is based on retirees and beneficiaries still living when statements were issued, active members, and inactive members who are vested or have not had a two year break in service:

Where do you fall?

Size of Benefit Cut % of Participants Impacted
None 45%
0.01%  to 10% 8%
10.01% to 30% 11%
30.01% or more 36%

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how we got here: From Solvent to "critical and declining"

The original Pension Plan for Bricklayers & Allied Craftsmen Local No. 7 was formed with good intentions by the employers and the union to attract the best tradesmen and to keep them in the union. That Pension Plan saw some truly good years. There was a time when steady work and consistent investment kept the Pension Plan on solid ground and positioned to take care of its members when they retired. In fact, the Pension Plan did so well that at the end of some years in the 1990s, it had a surplus of funds.

Like most people, the managers of the Pension Plan understood that the best way to manage a surplus was to save it for a rainy day. If you spend your surplus rather than saving it, you will likely be unprepared if things go downhill. Even squirrels understand they have to gather extra acorns for lean times.

Unfortunately, the federal government did not see things so clearly. Some politicians worried that any pension surplus, put away for a rainy day, could be used as a tax haven. So the government required pensions to use any surplus to increase benefits for pension plan members. While that was great for Local No.7 members during a strong economy, the law didn’t allow anything to be saved for the inevitable rainy day.

In the early 2000s, it didn’t just rain, it poured. Investments were suddenly not as strong as they were in the 1990s. When the housing crisis hit, there was a tremendous loss of local union jobs. Some employers retired or closed up shop. Fewer union workers entered the workforce. That meant there were more retirees (many still benefiting from the good years) being supported by fewer active union workers and employers.

Despite previous reductions in some benefits, the Local No. 7 Pension Plan could not recover from the economic hit. Other issues, such as union members from other locals working in the area without paying into the Local No. 7 Pension Plan, have compounded the problem.

It is telling that in 2006, the federal government changed its mind about surplus funds being used as tax havens. Congress finally changed the law, but far too late to be of any help to this Pension Plan.

So the combination of a tough economy and poor decisions by the federal government have brought us to this dire situation. The fact is that if the Pension Plan continues as it has, it will be insolvent in 10 to 12 years. The only way to make up for the past is to plan for the future, for your sake, for the sake of your current union brothers and sisters, and for the sake of those to come.

We have exhausted all reasonable measures in seeking to find a remedy for the looming insolvency. Your yes vote on the proposed Pension Rescue Plan will allow the greatest number of people to achieve the best possible outcome, while keeping the Pension Plan solvent for years to come.

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