UFCW LOCAL 1500 PENSION PLAN
FAQS REGARDING CRITICAL STATUS DETERMINATION
1) Will my already accrued benefits be cut?
At the current time, accrued benefits are not being cut.
2) How will accrued benefits be determined going forward?
FUTURE benefit accruals will be determined during the development of the Rehabilitation Plan. The law allows, and may mandate, reductions in future benefit accruals, but the Trustees have not determined that to be necessary at this time.
The Rehabilitation Plan is expected to be finalized and adopted by the end of the year. At that time, notice will be sent to all affected parties.
3) Are the Disability Pension and Early Pension Benefit options being done away with?
The Disability and Early Pension Benefit options are considered “adjustable benefits”. While the law allows pension plans in critical status to reduce or eliminate future “adjustable benefits” the Trustees have not yet developed the Rehabilitation Plan. Therefore, currently, there is no change to these future benefits.
4) Will we receive notice of the Rehabilitation Plan before it goes into effect so we can make a determination on whether to retire before that?
The Fund will advise you, via written notification, of the Rehabilitation Plan once adopted.
5) What is an accumulated funding deficiency?
An accumulated funding deficiency basically means the UNFUNDED LIABILITY of the Plan. Put another way, it is the shortfall of assets used to pay vested benefits.
One way an accumulated funding deficiency can occur is when the Fund’s assets do not yield the actuarial assumption for the Fund’s return on investments (ROI).
The Investment markets had a sporadic 2018, particularly in the 4th Quarter. The Fund did not meet it’s assumed ROI for 2018.
Accumulated funding deficiency basically means that the required amount of contributions & investment income needed to fund the present value of future benefit obligations has not been met for a particular period.
PLEASE NOTE, AN ACCUMULATED FUNDING DEFICIENCY DOES NOT MEAN THAT THE FUND IS INSOLVENT OR BANKRUPT. IT MEANS CURRENTLY THE CONTRIBUTIONS AND ROI ARE NOT SUFFICIENT TO MEET AND/OR SATISFY THE FEDERAL FUNDING REQUIREMENTS.
Accumulated funding deficiency means the excess of (i) the present value of projected benefit obligations (PBO) based upon the actuarial assumptions used for accounting purposes (i.e., used in preparing the plan sponsor’s financial statements in accordance with FASB Statement No. 87), over (ii) the fair market value of all ERISA Plan assets.
An accumulated funding deficiency is the excess of the total charges to the funding standard account for all plan years over the total credits to the account for such years or the excess of the total charges to the standard account for such years over the total credits to such accounts for these years.
It is important to remember that several years ago, A&P went bankrupt leaving a large population with vested benefits and a loss of contributions to the Fund. While the Fund did weather the storm with the A&P bankruptcy, it did have an effect on the Plan’s funding.
6) What is a credit balance?
A plan sponsor of a defined benefit pension plan is obligated to make at least the minimum required contribution each year to the plan. A plan sponsor may make more than the required minimum contribution, as allowed under the Internal Revenue Code.
Each dollar contributed for a given year that is in excess of the minimum is recognized as a credit. Credits are accumulated to build the credit balance.
Generally, credit balances that have been accumulated over prior years may be used in lieu of or to reduce contributions required to satisfy the minimum funding requirements of the current year
The Fund has a credit balance from prior years’ contributions.
7) Why is the Fund deemed critical?
The Federal government implemented funding levels. If a Fund does not meet these funding levels, it is classified in the category developed by the Federal government.
The Fund is “critical” because the Fund’s Actuary has calculated that the Plan is expected to have an accumulated funding deficiency within the current or next 3 plan years.
AGAIN, PLEASE NOTE, AN ACCUMULATED FUNDING DEFICIENCY & THE DETERMINATION OF BEING IN “CRITICAL STATUS” DOES NOT MEAN THAT THE FUND IS INSOLVENT OR BANKRUPT. IT MEANS CURRENTLY THE CONTRIBUTIONS AND ROI ARE NOT SUFFICIENT TO MEET AND/OR SATISFY THE FEDERAL FUNDING REQUIREMENTS.
8) How long does the Fund have to abide by the rehabilitation plan?
Generally, 10 years.
9) Am I going to lose my pension?
At this time the Fund is able to pay its benefit obligation. It is not insolvent or bankrupt. The Rehabilitation Plan is designed to assist the Fund in meeting both its present and future funding obligations, as determined by current Federal funding standards.