$125,000 Dollars. This is the approximate annual fee for the management of a $25 million account for a multiemployer pension plan. Multiemployer pension funds range from being very big too small. However, an account of approximately $25 million represents a typical sized account for many of the Taft-Hartley funds that are managed by investment companies.
Each fund differs in total assets. The plans have a fairly wide diversity of investments and members can learn what total fees are paid to the investment consultants annually. Health and Welfare plans also have forms that members can access to see what fees are paid to respective vendors.
Added to these investment consultant fees are the administrative fees. All of these fees add up to a formidable amount of responsibility and money. Enter the dire need for EDUCATION of TRUSTEES and ADMINISTRATORS!
With approximately 180 multiemployer pensions in the Critical Status Zone, and others on the Endangered list still needing infusions of both new money and/or money taken off the check to keep from becoming a Critical Status Zone plan, education of the trustees needs to be re-examined. Here is a link to the list of pension funds on the Critical & Endangered list. http://www.dol.gov/ebsa/criticalstatusnotices.html
From my viewpoint, the reason many pension plans are on the Critical Status Zone list, when reverse engineered, is due to the Greed and Politics of many senior officers and trustees. When pension benefit decisions were being made, members had no way of knowing what was going on – and who in their right mind turns down increases to their pension?
From around the 60’s thru the mid 90’s, overwhelming numbers of unions, when confronted with how to break-up raises on newly negotiated Collect Bargaining Agreements said, “put it on the check!” On floor after floor, members elected and voted what they wanted.
From around the mid 90’s to the stock market crash in the 4th quarter of 2008, huge amounts of the raises were given to the pensions to increase pensions. Review your minutes and your collective memories from that time period and ask yourself a very straight forward question: How the hell can several newly contributed dollars over relatively few the years before a member retires, pay back a retiree in the form of massive increases in benefits over decades?
Example: a 50 to 55 year old member voices he/she wants to put the raises on the check for 20 to 30 years in the 60’s, 70’s, 80’s, 90’s and for some funds into 2000. A very small contribution exists in the plan for those years and the accrual rate, which is the pension amount reflects that amount. After approx. 25 years plus, these very same men are now the politicians and senior officers and trustees – so from that same era are now in charge. Money is flowing in from hours and investment earnings from the mid 90’s on. The senior officers, even though they have an Officers’ pension, want to float to the membership large PAST service accrual rate increases for their own benefit and to raise their upcoming and pending retirement income – GREED.
They also want to keep their political jobs, and nothing is better for politics than substantial pension increases year after year under the guise of “we built this union” and deserve it, which in later years becomes an “entitlement” way of thinking. In a Defined Benefit – you only get what you paid for! Understand that fund professionals do not make the final decisions, and this class of trustee are skilled in getting the answer they want. This in spite of the massive availability of education readily available, grateful members believed these leaders were acting based on modern pension development and in the members’ best interest. The dreadful results are what we see playing out today in hundreds of underfunded Taft-Hartley pensions – POLITICS.
The members who could do the math and not be led down the political path were labeled idiots and loose cannons. For example, they knew that $8 – $12 of new raises contributed over a few years, so in the late 90’s and thru to 2008 and even with very solid investment returns during those years, in NO WAY can support hundreds of dollars in benefits paid monthly for decades in retirement. Add to that the many enhancements, especially the ever popular 30/35 year and out, which is like putting gas on a fire in that kind of funding environment.
Spring ahead to the political BS in this unfolding disaster that is happening today. My favorite one is that the “government made us make benefits increases”. Politics at its worse – makes the Tea Baggers look good. YES – there is a pension rule/law that when a pension is OVERFUNDED, benefits improvements can/will be made. The BS is that there are many responsible ways an educated trustee can do this without digging an even bigger hole by raising past accruals – such as reducing amortization schedules (debt), fixed benefit increases (paid for upfront), raising benefits prospectively from that year forward which can be supported, etc.
All of this and much more leads back to education of trustees, which has been available for decades. I taught in the IFEBP’s New Trustees Institute 2 times a year for many years. With their staff, I helped create the Advanced Trustee forums and mentoring structure. I have presented in class and at many conferences over 100 times on pension and H&W issues, and yata, yata, yata. What I know firsthand is that my generation of Trustees created the culture of self-dealings, missing class in lieu of everything from very expensive golf to ?????? Paid for by the vendors. The entourages out playing on class time. And it extends far past playing when we should be learning.
And I’m not talking about the useful and fun cocktail reception and general entertainment, they are earned by those trustees doing their job. This type of activity is OK with the DOL – Department of Labor. It is NOT a targeted activity to an individual and/or group of trustees. Networking is very good in this setting.
To be crystal clear in my day it has been a sizable number of the senior most decisions makers – clueless on how to be effective trustees across the board – this is why hundreds of Taft-Hartley funds are in jeopardy today. Several hundred self-dealing trustees with an entitlement attitude on steroids. If any of these people EVER reached into their own pocket – it would be news! They could be influenced and many bought! The extensive amounts of money spent is jaw dropping. This is membership money paid to provide a real service to the funds, which is also the big money spent on a few hundred Trustees/Senior Officers with the leverage on who is hired.
Fund management fees and the actions needed to run a modern portfolio, and even do above board inter-action with trustees would be the SMALLER percentage of total fees for many vendors. Add this to the huge “past service increases” and hello to underfunded funds.
Retirees from union Taft-Hartley funds are in harm’s way starting next year with massive benefit and retiree cuts relative to current benefit.
When those 1st checks go out to literally hundreds of thousands retirees and active members realize cuts, the ABC, RTW, ALEC, Heritage Foundation and many others all supported by CURT (Construction Users Roundtable) will hang the Multiemployer plans out to dry. And even those funds on an even keel with be stigmatized in the eyes of the non-union workers and contractors. Hell – right now many CURT end-users, construction managers are mandating that they will not sign a PLA (Project Labor Agreement) with a defined Pension in it.
Here is a link to the grading of the different generation of Trustees for your consideration and comports with what is unfolding – NOW! http://1drv.ms/1SzTsSR
Hours and only hours in massive amounts can save some of these funds unless someone has 80 Billion or so lying around to cover these unfunded benefits. Keep talking to the nice business men with the suits on and we are gone!
“if you see a good fight – get in it”
Danny L Caliendo
Organizer
Labor Rising/Labor Combat
