2. Topics for Discussion
• PPA Refresher
• FASB
• Actuarial Projections
• Liability By Trade-Where Do We Go From Here
• Q&A
3. The Problem
• Economic woes put defined benefit plans into trouble.
• Typical 2008 & 2009 investment returns were in the range of -20%
to –30%.
• Compared to expected returns, this means most funds lost one-
fourth to one-third of their expected value.
• For most plans, the value of the 2008 investment loss exceeds the
value of all future benefit accruals.
– Benefit accruals could be frozen and these plans would still cost
more to fund in 2009 (and later) than before the crisis.
5. Pension Protection Act (PPA) - Certification Criteria
“Yellow Zone” “Orange Zone” “Red Zone”
Endangered Seriously Endangered Critical
• Not in critical status, and • Not in critical status, and • AFD in the current plan year or
projected in the next 3 years (4
• Funded percentage < 80% • Funded percentage < 80% years if < 65% funded), without
regard to PPA amortization
OR AND extensions
OR
• Accumulated Funding • AFD in current plan year or
• Funded percentage < 65% and
Deficiency (AFD) in current projected in the next 6 years,
fails 7-year solvency test
plan year or projected in next taking into account PPA
6 years (taking into account amortization extensions OR
PPA amortization extensions) • Expected contributions for
Note: An “Accumulated current plan year do not cover
Funding Deficiency” means normal cost plus interest on
the Credit Balance is unfunded liability, PV of inactive
negative liability exceeds PV of active
liability, and projected AFD in
current or next 4 years
OR
• Fails 5-year solvency test
Status is “Green”, if none of “Yellow”, “Orange”, or “Red” tests applies
14. Financial Accounting Standard Board
FASB Objective
Background Information:
At the March 17, 2010 FASB Board meeting, the FASB chairman
announced the addition of a new project aimed at expanding
disclosures about employer’s participation in a multiemployer plans
The project would require employers to disclose any potential
unfunded liability on financial statements.
FASB is currently conducting “Outreach” to interested parties to
determine impact on employers
18. OPERATING ENGINEERS
• Southern California
– Currently Certified in “Red Zone”
– Current Liability =Approx $
• Northern California
– Currently certified in the “Orange Zone”.
– As of January 1, 2010, Liability = Approx. $1.45 billion
– FIP required
– CBA Increases All to Fringes
19. CARPENTERS
• Southern California Carpenter
– Currently in the “Green Zone” with no Unfunded Liability
• Northern California Carpenters
– Currently Certified in “Red Zone”
– 13 Year “Recovery Improvement Plan”
– Current liability in Plan= Approx $2 Billion
20. LABORERS
• Southern California Laborers
– Currently Certified in “Yellow Zone”
– 2009-2012 Agreement -$0.25 allocated to pension
– Expected to be in “Green Zone” by 2013
• Northern California Laborers
– Currently Certified in “Yellow Zone”
– As of May 31, 2010 Liability= $900 million
21. CEMENT MASONS
• Southern California
– Currently Certified in “Yellow Zone”
– Effective January 1, 2010 Liability= Approx $60 Million
– FIP Required
– $1.45 allocated to Fringes on July 1, 2010
• Northern California
– Currently in “Green Zone”
– Effective August 31, 2010 Liability-Approx $143 Million
– FIP not required
22. IRON WORKERS
• Multi Statewide Agreement
– Currently Certified in “Yellow Zone”
– Unfunded Liability is Approx. $200 Million
– FIP will need to be negotiated this year
23. TEAMSTERS
• Multi Statewide Agreement:
– Western Conference of Teamsters
– Currently Certified in “Green Zone”
– No Liability in Plan