Doug Peterson AGC Labor Relations Director
A review of pension plans across the country is very troubling. A recent survey by the National Coordinating Committee of Multiemployer Plans showed that over 50 percent of the reporting plans are below 80 percent funding. By comparison the plans of the five basic crafts in Western Washington are all above 80 percent funded. While none of the funds are completely funded and have unfunded vested liability (withdrawal liability) none face onerous and expensive rehabilitation requirements that so many other plans across the country have.
The dot.com bubble burst of 2000 and the market collapse in 2008 have been devastating to multi-employer pension plans jointly sponsored by AGC of Washington and the five construction unions. Federal legislation in 2006 and 2010 was passed to mitigate the impact of past and future economic down turns on these pension plans. The two pieces of legislation are the Pension Protection Act of 2006 and the Pension Relief Act of 2010.
The 2006 Pension Protection Act’s most important provision was to allow multi-employer pension plans to accumulate a rainy day fund. Prior to 2006 no pension plan could have reserves in excess of 100 percent of its liabilities. If it did exceed 100 percent funding employer contributions to the plan would no longer be tax exempt under the federal tax code. Many plans were forced to make pension benefit increases when the prudent action would have been to accumulate a “rainy day fund.” Most of these benefits once given could not be taken back in the event of future funding troubles. Also the Pension Protection Act (PPA) of 2006 established the following funding statuses:
• Safe or Green – funding above 80%
• Endangered or Yellow – funding under 80%
• Critical or Red – funding under 65%
Following the 2008 market collapse the Pension Relief Act of 2010 was enacted. This legislation focused on allowing pension funds to spread the 2008 losses over a greater period of time to allow more time for the economy to recover and for better market returns.
Below are some of the most recent data related to the pension plans:
Carpenters Cement Masons Laborers Operating Engineers Teamsters WCTPTF
PPA Funding Zone
Green Green Green Green Green
Unfunded Vested Liability
Yes-$120 M Yes-$3.7 M Yes-$91. M Yes-$502 M Yes-$3.5 B
PPA Funding Ratio
85.2% 95% 94% 87.6% 93.4%%
$5.50 $6.97 $3.70 $8.40 $7.15
It is hoped that with increased hours of work and good market returns the plans will continue to improve eventually becoming fully funded.
For more information contact Doug Peterson at 206-284-0061.