New congressional testimony validates a major component of the MPS Action Plan just weeks after AFM-EPF trustees dismissed the plan as “based on a distortion of facts.”
The AFM-EPF trustees are contemplating potential cuts of 25-30% to our existing pension benefits. MPS and Tom Lowman, one of the country’s leading actuaries, recently proposed a comprehensive Action Plan that could help the AFM-EPF for decades to come. The Action Plan included a three-year delay of benefit cuts, negotiating 6% increase in employer contributions for five years, then reverting to 2.9% per year over the next 25 years. We have shown that if the trustees execute our plan and raise employer contributions, much milder cuts could take place, and would not happen for at least three years. Unfortunately, less than 48 hours after we proposed the plan our trustees refused to even consider it. They state that our call for a three-year delay in benefit cuts is “based on a distortion of facts” and is “just empty rhetoric.” However, recent congressional testimony thoroughly debunks those statements by the trustees and proves that a growth target of 6% in employer contributions is, in fact, attainable.
Joint Select Committee Hears Testimony On Employer Contributions
On April 18 the Joint Select Committee on Multiemployer Pensions, which consists of sixteen Senators and Congressmen, held a hearing in Washington DC. The panel heard from two experts who provided a briefing on the history and dimensions of the multiemployer pension problem. One of the experts was Ted Goldman the senior pension fellow at the American Academy of Actuaries and chairman of the Academy’s Pension Practice Council. Mr. Goldman pointed out that the Academy is a strictly nonpartisan, objective professional association representing U.S. actuaries before public policymakers. He further stated that the Academy’s Pension Practice Council has diligently been working over the past few years to analyze the financial condition of troubled multiemployer plans and to provide actuarial analysis of the challenges the multiemployer plan system faces and potential ways forward to address them. In short, Ted Goldman is one the foremost experts on the multiemployer pension problem in this country. That’s why the Joint Select Committee asked him to testify. In his testimony, Mr. Goldman addressed the topic of employer contributions. Mr. Goldman testified as follows: “A recent study indicates that aggregate contributions to multiemployer pension plans from 2009 to 2014 increased by 6.9 percent per year, significantly outpacing the average inflation rate of 2.1 percent over this period.”
What Does This Mean for the AFM-EPF?
This is a highly significant statement, with serious implications for the AFM-EPF. During our National meeting, MPS actuary Tom Lowman cited numerous instances where pension plans in trouble obtained 6% increases in employer contributions for multiple years. These included the Baltimore Teamsters and the Central States Teamsters fund. He also cited the fact that the AFM-EPF itself obtained 6% increases in employer contributions for multiple years in the middle part of the last decade.
The AFM-EPF trustees state that our plan is “based on a distortion of facts” and is “just empty rhetoric.” However, Mr. Goldman's expert congressional testimony directly challenges those assertions. His testimony validates part of the MPS Action Plan, which targets a 6% growth in employer contributions to the AFM-EPF. Not only is the 6% increase in employer contributions possible, it is still below the national average of 6.9% cited in congressional testimony.
It is becoming clear as to why the trustees just dismissed the MPS Action Plan without citing any numbers to support their case. According to the most recent available data, the AFM-EPF is currently seeing an annual growth rate of only 1.7% in employer contributions and they project that the growth rate will be a mere 2.5% over the next 20 years. Proving yet again, the AFM-EPF is not just a little behind in employer contributions, but vastly underperforming the industry standard of 6.9%.
Read the AFM-EPF trustees’ full response to the MPS Action Plan here.
The study referred to is Lisa A. Schilling and Patrick Wiese, Multiemployer Pension Plan Contribution Analysis, Society of Actuaries, March 10, 2016. Read the study here.
Read the complete Ted Goldman, MAAA, FSA, EA Senior Pension Fellow American Academy of Actuaries Academy testimony before the Joint Select Committee on Solvency of Multiemployer Pension Plans here.