New York State Teamsters Benefit Funds Newsletter

News and information from your Trustees and StaffFall 2015

Continued on page 2

Latest Information for Members

Pension & Retirement Fund News Update

the actions taken by the Trustees were difficult for both participants and contributing employers, but nevertheless were the right steps in improv-ing the long-term health of the Fund. It’s important that you know what these actions were:

2004 Benefit Changes – Following negative investment returns for three consecutive years from 2000-2002, the Trustees took the difficult action of reducing future service accrual from 2.6% to 1.3% of contributions, and incentives were introduced to encourage deferred retirements.

Funding Improvement Plan – Following the enactment of the PPA, the actuaries certified the Fund as being in “Endangered” Status for the 2008 Plan Year. As required under the new law, the Trust-ees adopted a Funding Improvement Plan that required mandatory increases in employer contributions rates in order to maintain current levels of benefits.

Rehabilitation Plan – Following the market crash in 2008, the actuaries certified the Fund as in “Critical” status for the 2010 Plan Year. The Trustees adopted a Rehabilitation Plan under the PPA at the earliest opportunity in June, 2010, effective January 1, 2011. In con-nection with the Rehabilitation Plan, the Trustees worked with the Fund’s professionals to develop a Plan that provide for further reductions in accruals under certain schedules, and imposed significant annual employer contribution increases.

Alternative Investments – Recognizing that additional invest-ment income is needed every year to cover Fund benefits, the Trustees realized that it was necessary to find investments that were not as tied to the ups and downs of the stock and bond markets. With the advice and oversight of the Fund’s professional investment consultants, the Trustee implemented an alternative investment strategy in private placement portfolios. Not a strategy generally available to smaller pension funds, this approach provides for direct, long-term investment that generally is expected to achieve greater returns over time.

Strengthening Return to Work Rules – Participants who retire and then return to work that prevent other Teamsters from work-ing or work for non-union employers that compete with Contributing Employers hurt the Fund. It prevents contributions to the Fund, and encourages actives to retire early rather than continuing to work and have contribution made on their behalf to the Fund. The Trustees have been enforcing the benefit suspension rules for participants who violate the Fund’s rules.

lthough the Trustees have been doing everything possible to restore the Pension Fund to financial health, the Fund continues to be severely underfunded and shows few signs of immediate improvement. Even as the effects of the

“Great Recession” start to fade, the Pension Fund remains in critical status with many challenges. This is not just a problem with our Pension Fund. Many other multi-employer pension funds face the same or worse problems. In addition to the severe market losses from the big downturns during 2000 and 2008, multiemployer plans face a declining active union population, an exodus of contributing employers, and difficulty increasing contribu-tion rates without driving more employers out of Fund. The Pension Fund has been certified since 2010, as in “Critical Sta-tus” under the Pension Protection Act of 2006 (“PPA”). Last March, the actuaries again certified the Pension Fund as in “Critical Status” for the 2015 Plan Year with a “funded percentage” of 45.6%. Unfortunately, the Pension Fund’s funded percentage has remained in the 45-46% range for the last three Plan Years. The funded percentage is one of the ways to measure a pension fund’s health, and it is simply a com-parison of the fund’s assets against benefit obligations. The following chart shows the status of the Fund based the funded percentage, as certified by the Fund’s actuaries, using the Department of Labors required calculation method since 2010.

This shows that although the Pension Fund’s decline appears to have stopped, there has not been meaningful improvement in the overall funded percentage in the last several years. And, given the expected returns for this year, the funded percentage reported for 2016 prob-ably will decline further.

What Trustees Are Doing to Improve the Pension Fund’s Financial Condition

Since the first financial crisis in 2000, the Trustees have been work-ing to improve the financial deterioration of the Pension Fund. Some of

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YEAR FUNDED PERCENTAGE

2010 ............................. 62.88% 2011 ............................. 61.97% 2012 ............................. 52.25% 2013 ............................. 45.60% 2014 .............................46.50% 2015 ............................. 45.60%

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Fund Restructuring – The Trustees have implemented Fund changes that provide incentives for employers to remain in the Fund in a way that is a positive for the Fund’s overall financial condition. The Fund offers interested employers the opportunity to pay down their withdrawal liability in return for a reduced contribution rate for a number of years.

Employer Withdrawals – With more and more companies exiting the Fund, the Trustees are taking a harder line on employer withdrawals. The Trustees changed the withdrawal liability assessment formula to require withdrawing employers to pay more by changing the calculation assumptions to better reflect the Fund’s severely unfund-ed status. In addition, participants employed by withdrawing compa-nies are subject to penalties, and in some cases reductions in benefits.

Continuing Challenges the Pension Fund Faces Despite all these efforts, the Pension Fund continues to face major challenges in its ongoing effort to return to financial soundness. And, what’s worse, the headwinds continue to be as strong as ever, withlittle relief in sight. Despite an overall improvement in the nationwide unemployment rate, the Pension Fund continues experiencing a decline in the ratio of those actively working in covered employment to those retired and receiving benefits. Simply put, the industry is not replacing those who retire with new hires at the same rate, as evidenced by this chart:

The net result of this trend is that each month, the Pension Fund is faced with benefit payment amounts to retirees and beneficiaries that far exceed the amount of contributions being received on behalf of those actively working. The burden of replacing this shortfall falls on the investment return, which does not even cover the shortfall even if the Fund meets its assumed rate of return of 8.5%. The following chart shows the shortfall each year between contribu-tions received and benefits paid out by the Fund.

YEAR END CONTRIBUTIONS BENEFITS PAID DIFFERENCE 12/31/2009 ...... $85,925,231 ...............$254,499,556 ........... ($168,574,325) 12/31/2010 ....... $84,188,914 ................$265,972,421 ........... ($181,783,507) 12/31/2011 ....... $92,564,876 ...............$279,617,619 ............ ($187,052,743) 12/31/2012 ....... $101,196,818 ..............$278,996,627 ........... ($177,799,809) 12/31/2013 ....... $108,206,048 .............$278,945,463 ........... ($170,739,415) 12/31/2014 ....... $108,584,878 .............$279,823,846 ........... ($171,238,968)

Even with the Fund’s weighted average investment return over the last three years being 10.17% and over the last five years it has been 8.97% – exceeding the Fund’s assumed rate of return of 8.5% – it still is not enough to make up for the amount the Fund must pay every year for benefits over contributions received. Simply increasing employer contributions every year is no longer

the answer. Although the Fund’s current Rehabilitation Plan

calls for a 6% annual increase in contributions (8.25% for Schedule E), contribution rates can be raised only so high before more employers exit the Fund. Additionally, a number of participants are now bearing some of the burden of these increases with pay increases being reallocated to pen-sion contributions, with some now over $1.95 per hour. Currently, there is a disagreement between the Union and Employer Trustees about increasing the contribution rates further. A trustee deadlock arbitrator will decide if contribution rates at 6% or higher are sustainable. If the arbitrator concludes they are not, there will be

even greater pressure on the finances of the Fund. Additionally, the Fund’s actuary has advised that unless the Fund can assume at least 6% annual increases in employer contributions, the Pension Fund will be in “Critical and Declining” Status for Plan Year 2016, under the new Multiemployer Pension Reform Act of 2014 (MPRA).

Multiemployer Pension Reform Act of 2014 (MPRA) MPRA is the new law that provides for benefit suspensions – includ-ing for those already receiving pensions – if there are no other options to save a pension plan from running out of money (see article on pg 3). Pension plans that are certified as “Critical and Declining” must consider benefit suspensions. It is an option of last resort because reductions in benefits, especially for those already in pay status, cause such hardship. Unfortunately, it is something that all trustees must consider when the alternative is even greater reductions in benefits or no benefits at all. Earlier this month, the Central States Pension Fund announced ben-efit reductions in order to save that plan. While difficult for everyone, Central States’ participants faced greater benefit uncertainty if those reductions were not made. There is no doubt that other pension plans throughout the country facing the same difficulties will be announcing similar actions in the future. The Trustees will continue to take every possible action to improve the Fund’s financial condition. The Trustees, however, also must be realistic about the long-term financial stability of the Plan. Participants will be kept informed of the Trustees actions.

YEAR 2008 2009 2010 2011 2012 2013 2014

Retiree & Beneficiaries ................. 15,896 ............15,925 ...........16,119 ...........16,627 ...........16,516 ............ 16,327 ...........16,197

Inactive Vested Participants .......... 5,609 ..............5,812 .............5,893 ............5,818 .............6,143 .............. 6,352 .............6,546

Active Participants ........... 15,242 ............14,794 ...........13,883 ..........12,813 ...........12,334 ........... 12,217 ...........11,896

Total Participants ............. 36,747 ............36,531 ...........35,895 ..........35,258 ...........34,993 ........... 34,896 ...........34,639

Ratio of Activeto Inactives ....................... 0.71 .................0.68 ...............0.63 ..............0.57 ...............0.54 ............... 0.54 ...............0.52

INFORMATION REGARDING YOUR FUND BENEFITS

3 NYS Teamsters Benefit Funds Newsletter

Health & Hospital Fund Report

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Pension Benefit Guarantee Corporation (“PGBC”) — Annual Premium Increase for the Year 2015 The PBGC maintains a Multiemployer Insurance Program, which provides financial assistance to plans that are unable to pay basic PBGC guaranteed benefits when due. The Multiemployer program insures the benefits of nearly 10 million workers and retirees in approximately 1,400 plans. To fund the Program, every multiemployer plan in the country is required to pay an annual insurance premium based on the number of participants covered by the plan. Participants include (i) active employees, (ii) former employees who worked long enough to earn vested benefits, but who left the plan without receiving a retirement benefit immediately, and (iii) retirees. In accordance with the Multiemployer Pension Reform Act of 2014 (“MPRA”), the annual premium for this program for 2015 was increased from $12 to $26 per Participant. For Plan years after 2015, the annual pre-mium will increase based on increases in the national average wage index.

For our Fund, the economic impact of this mandated adjustment will be an increase in annual premiums of $482,008, which represents an increase of 116%. The 2014 premium was $415,668 and the 2015 premium payment will be $897,676.

Facts About MPRAhe Multiemployer Pension Reform Act of 2014 (“MPRA”) became law on December

16, 2014. It is an attempt to address the growing financial crisis among multiemployer pension plans, and the law makes a number of changes to the rules governing those plans. The most significant changes are the new benefit suspension rules, which re-quire trustees of severely underfunded pension plans to consider benefit reductions – including those of retirees already receiving their pensions – if necessary to save the plan. Here are some of the basic facts about MPRA:

What Pension Plans Must Consider Benefit Suspensions? MPRA applies to only the most-troubled multiemployer pension plans. Generally, to be eligible for MPRA’s relief, a pension plan must be running out of money (becoming insolvent) within roughly 14 years or within roughly 19 years if the plan’s retiree-to-active ratio exceeds 2-to-1 or the funded percentage is less than 80 percent.

Are there Limitations on the Suspensions? Yes. Benefits cannot be reduced below 110% of the government (PBGC)-guaranteed amount, and no pension plan can cut more than is necessary to avoid insolvency. Additionally:

• Participants age 80 or older are exempt from any reductions. • Participants who are at least 75, but less than 80 years old, must receive less of a reduction. • Participants who are receiving a disability benefit are exempt from reductions.

What is the Process for Benefit Suspensions? In order to implement benefit suspensions, a pension plan must ap-ply to the Department of Treasury (Treasury), which must review and approve or deny an application. A pension plan must provide writ-ten individualized notices of the application and the specific suspen-sion amounts to all participants, beneficiaries, contributing employers, and the union. Currently, no benefit suspensions can be implemented sooner than nine months after the application is filed.

Do Participants Get to Vote on the Benefit Suspensions? If Treasury approves the application, all plan participants – active, vested and retired – will receive a ballot via U. S. mail and have the opportunity to vote on the benefit suspensions.

he Fund’s auditors have finalized the 2014 performance and the Board of Trustees is pleased to announce that

in 2014 the Health & Hospital Fund’s assets increased by $40,931,057. This increases the net fund value (Total Assets minus Liabilities which include the Incurred But Not Recorded Benefit Claim Expenses) to $296.7 million with 20.16 months of reserves. The Health Fund had total revenue of $210,830,375 including Contributions of $196,222,755 and Net Invest-ment Income of $13,358,283 representing the majority of the increase. Expenses for Benefits Paid, Insurance Premiums and Administrative Expenses amounted to $167,813,579.

Trustees Improve Fund’s Financial Outlook It is important to point out that within the Administrative Expenses are two government assessments the Fund must pay to comply with the Affordable Care Act. The first assessment is called the Patient-Centered Outcomes Research Institute (PCORI) fee which was $53,304 in 2014. The second and the more costly assessment is the Reinsurance Program Fee which was $2,069,046. This assessment is used by the government to assist in maintaining affordable health rates within the federal and state exchanges. It is important to note that these assessments totaled $2,122,350 and represent 21.5% of the Fund’s total Administrative Expenses. These government assessments will continue to be assessed to the Fund in the future. The PCORI fee will be calculated at a rate in-dexed for inflation and the Reinsurance Program fee will be calculated at a lower rate beginning in 2016. Assets under management as of December 31, 2014 are $331,872,029. The assumed rate of return for the investments is 5.0% and actual performance for 2014 was slightly under that assumption at 4.80%, with the three year return at 8.18% and the five year return at 7.91%. As of December 31, 2014 the Fund’s investment portfolio allocations were 58.25% in Fixed Income, 20.97% in US Equities and 20.78% in Non-US Equities. Since December 31, 2008, after the worldwide financial markets crash which resulted in what is referred to as the Great Recession, the Trustees’ actions have resulted in a steady improvement of the Fund’s financial condition. At the end of 2008 the assets under management were $97,151,874 and the reserves were at a dangerously low level of only 3.43 months. With the Fund’s strong performance and considering future medical cost trends, the Trustees have approved very modest health care rate increases over the next five years. Those increases are as follows: 2014 - increase of 2.5%, 2015 increase of 2.0%, 2016 increase of 4.0%, 2017 increase of 5.0%, and 2018 increase of 4.0%. The two new governmental assessments referred to above are reflected in the rate increases. The Trustees have been able to keep the rate increases well below increases proposed in the market place (insurance companies and state exchanges) which amount to between 12% and 15+%. The Trustees’ goal and focus is to continue working with the Fund’s professionals and service providers to provide affordable solutions in health care for you and your family members.

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New York State TeamstersBenefit FundsP.O. Box 4928Syracuse, NY 13221-4928

FORWARD SERVICE REQUESTED

New York State Teamsters Benefit Funds

FAX NUMBERSAdministration: (315) 455-1237Finance Dept: (315) 455-9834Health Dept: (315) 234-1046Pension Dept: (315) 234-1047

E-MAIL: benefits@nytfund.org

NYS Teamsters Benefit Funds ...............315-455-9790 TOLL FREE ..................................... 1-877-698-3863

Excellus BlueCross BlueShield Customer Care ..............................1-877-650-5840 Inpatient Admissions Pre-Cert ...... 1-800-363-4658 Participating Providers ................. 1-800-920-8889

Express Scripts - Medco (RX) ...........1-800-939-2108

Lifetime Benefit Solutions (Dental) .. 1-877-264-4861

HRA Customer Service ...................... 1-800-327-7130

Davis Vision (Vision Benefits) ........... 1-800-783-6872

Legal Benefit Plan ............................ 1-888-697-8527

Ullico (Disability) ............................ 1-888-855-4261

DO YOU HAVE QUESTIONS

ABOUT YOUR BENEFITS?

Contact the Fund Office or the Benefit Provider directly using one of the telephone numbers below:

HAVE YOU MOVED RECENTLY? Remember that if you change your address, you need to contact the Fund office to keep your records current. The Fund sends out important updates on your benefits throughout the year. An incorrect address could delay your receipt of this important information. If you have changed your address, please contact the Health Fund Member Services at (877) 698-3863 or visit the website at www.nytfund.org to fill out a change of address form and mail it to the Fund office.

(315) 455-9790Toll Free (877) 698-3863

BOARD OF TRUSTEES

EXECUTIVE ADMINISTRATORKenneth R. Stilwell

New York State Teamsters Council Health & Hospital Fund

New York State Teamsters Conference Pension & Retirement Fund

LABOR TRUSTEESJohn A. BulgaroCo-Chairman

Brian K. HammondMark D. May

Paul A. Markwitz

EMPLOYER TRUSTEESMichael S. Scalzo, Sr.

Co-ChairmanRobert L. SchaefferDaniel W. Schmidt

Tom J. Ventura

Information About the New Health and Hospital Fund Federal Tax Reporting Requirement

s part of the new reporting rules under the Affordable Care Act, the Health Fund is

required to file a new tax form with the Internal Revenue Service (IRS). This new filing will provide basic information regarding the Plan and who is covered under the Plan. The Fund will be providing you, the participant, with an IRS Form 1095-B which you will need to file your 2015 tax return. The Fund plans to have this form completed and mailed to you by the end of the first week of January 2016.

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