Pension Fund Update
  
 
December 15, 2003
Dear RMA Members,

By now, most of you should have received a notice from the Board of Trustees of the AFM & Employers Pension Fund (Dated 12/15/03) outlining the changes and benefit modifications that become effective Jan. 1, 2004.

We urge all Fund Participants to carefully review and save this notice. Note that this is an Adobe Acrobat PDF file.

Neither the RMA, the Pension Fund nor its Trustees can tell you when you should apply for your pension or other benefits. This is a complex decision, which should be made by each participant individually, in consultation with an accountant, tax advisor and others. Additionally, these most recent changes probably warrant a review of your life insurance and disability needs with an insurance professional as well.

This letter is not intended as a summary, official or otherwise. The Plan Document as created by the Fund’s Trustees defines your actual retirement benefits, disability benefits, beneficiary benefits, etc. That Document and Pension Fund operations must conform to ERISA (Employee Retirement Income Security Act) guidelines and relevant case law. The Act allows for great flexibility with regards to trustee authority, and if you are vested in the Pension Fund, your actual pension and/or other benefits will be determined at the applicable time by the Fund in conformity with the law and Plan Document as interpreted by the Trustees.

While the Trustee memo of December 15 is very comprehensive and quite clear and user friendly – especially given the complex legal and financial data it communicates – I know that many of you will continue to have questions. The issues involved are very complicated and no single memo could possibly anticipate all of our questions or anticipate the complete range of administrative or practical issues to be resolved by the Fund as it implements the decision of the Trustees.
However please be assured that;
• The Pension Fund is solvent and currently has no cash flow problems. The benefit reductions/modifications going into effect Jan. 1 are intended to ensure that no funding problems arise in the future.
• There will be no reduction in monthly payments to anyone currently receiving a pension (Regular Retirement, Early Retirement or Disability) or to anyone currently being paid a survivor annuity or beneficiary guarantee. (In fact your payments could increase if you continue to work, return to work, receive new-use orre-use wages, or if the Fund later receives contributions on your behalf for prior employment. Anyadditional pension contributions will then be computed in the manner applicable)
• Whether or not you are currently receiving a pension, contributions for covered employment through Dec.31, 2003 will be forever anchored to the old benefit multiplier schedule and the new benefit multiplier schedule will apply only to covered employment occurring on or after Jan. 1, 2004.
• If you are currently vested (or become vested and have creditable contributions prior to 2004); are not yet receiving your pension; and also continue to have covered employment on or after Jan. 1, 2004, your retirement benefits will eventually be calculated based upon these two different multiplier schedules and the contributions which apply to each.
Our Pension Fund has long had ancillary benefits which could best be described as “insurance-like” in nature. These “insurance benefits” are changing rather dramatically.
Item 2 in the Memo; Single Life Annuity and 50% Joint-and-Survivor Benefit Forms is a good example. The younger you are (or more correctly the greater the percentage of contributions made on your behalf for employment after Jan 1, 2004) the smaller the number of dollars in eventual pension benefits to which “guaranteed amounts”, “60-month guarantees” or “pop-ups” could apply.
These particular “guarantees” or “pop-ups” are only “activated” by actually drawing your pension and only apply to contributions from employment occurring prior to 2004.

This may be a factor to consider in terms of deciding when to retire and also in evaluating appropriate levels of insurance coverage during retirement

Item 4; Pre-Retirement Death Benefits bring big changes in the way that calculation is done and will only be payable going forward as a monthly annuity with no minimum guarantee to the beneficiary. The previous guarantee amount (which was no less than an amount equal to 100 payments at age 55) has now been replaced by a benefit that is actuarially adjusted for the age of both the participant and the beneficiary and continues only as long as the beneficiary survives. This is another item, which should be thoroughly reviewed in the context of your current insurance coverage and long term estate planning.

Item 5; Disability Pension Benefits contains very dramatic changes. For an affected participant who is 55 or older facing a choice between the new disability benefits and early (or regular) retirement, it is unlikely that the disability option would be the better one. There would be no greater monthly payment and one would give up the various “guarantees” and “pop-ups” which might be applicable to some or most of the benefit amounts payable if you draw a pension instead. If you are younger than 55 and currently vested, the choice will be a function of your immediate need today for a smaller number of dollars versus waiting for a larger number of dollars at some later time or even waiting until age 55 or older so you can actually “retire” instead. At that point one would receive more money that will come at least in part with additional “guarantees” attached to it.
I know that many of you have asked about the likelihood of any of these modifications or reductions being reversed in the future, especially in light of this years’ stock market gains. This question is almost impossible to answer. Only the passage of time will make it fully clear how the items mentioned here as well as other many other factors (Minimum Vesting, Benefits Earned by Pensioners Age 65 and Older, Future Levels of Employer Contributions, Accounting Methods, etc.) will ultimately impact the Fund’s future valuation. Improvements or modifications going forward will depend on that valuation and the philosophical approach of the Trustees to the type of Plan they feel is best for the participants.
For example:
If there is additional money at some future point, is it better to raise the benefit multiplier which impacts thousands of participants or to improve the disability benefit which impacts a small number of participants?
Or do you do a little of both?

I know that the overall pension news is disappointing and people have a right to be disappointed with the process. Phil Yao in his first meeting as a Trustee played a huge role in slowing down a train speeding off in the wrong direction. His thought provoking questions together with the good work of many of the other trustees resulted in a more equitable package than was originally planned. We should all be very grateful for that.
In my opinion, President Lee’s delay in appointing Phil was tied to politics and personal animosity – not to his fiduciary responsibility – That’s something to remember as well.
It was not my intent to write a long letter. I’m sorry for that, though any and all time spent trying to understand how your Pension Fund operates is a great idea. Many of us (myself included) don’t look too closely at the Pension Fund until the “moment of truth” arrives or tragedy strikes. In light of all the changes at the Fund, there is no better time than the present to review your beneficiary assignments and insurance planning.
On a personal note I want to thank all of the RMA members and Officers who helped with this issue and many others throughout the year. Your unconditional support allows me the freedom to make the mistakes and missteps that occur as one learns on the job – Your love and appreciation, while inspiring, is rightfully shared with each and everyone of you for the work we all do together as an organization.

Most Sincerely,
Phillip Ayling
President RMA International