Revitalizing the UFCW Minneapolis Pension Plan

UFCW Minneapolis Pension Plan faced a financial crisis, leading to benefit cuts and unaffordable employer contributions. Through strong leadership and negotiations, a new funding plan was implemented, freezing the legacy plan and introducing a Variable Annuity Pension Plan (VAPP). This innovative design shifts risks between employers and employees, ensuring full funding by 2035 while offering regular benefit improvements.

• Pension Plan
• Financial Crisis
• Negotiations
• VAPP
• Risk Sharing

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1. Case Study: UFCW Minneapolis Pension Plan David Blitzstein, President Blitzstein Consulting LLC FMCS National Labor-Management Conference August 22, 2018

2. Defining the Problem Endangered status since 2008 Funding Improvement Plan negotiated in 2010 Plan continues to experience adverse maturity issues Plan not making funding progress through 2017 Projected to certify critical status by 2023 2

3. Plan Approaches a Crisis of Survival Benefit cuts are not effective Employer contributions becoming unaffordable Significant employers withdrew in 2016 and 2017 Funding continues to deteriorate Heading into a potential bargaining crisis 3

4. The Role of Leadership Willingness to recognize the problem Initiated a labor management dialogue to determine options Tapped expertise Initiated education/communication campaign with membership Initiated early negotiations 4

5. Bargained Solution Freeze Legacy Plan effective 12/31/2018 Negotiated a funding plan for the Legacy Plan that targets full funding by 2035 Negotiated a new future service defined benefit plan that is designed as a variable risk sharing plan (Variable Annuity Pension Plan or VAPP) Negotiated benefit protections for active employees 5

6. Designing a Plan that is Attractive to Employers and Employees Benefits adjust annually based on investment performance compared to a hurdle rate As a result, the plan remains fully funded because assets and liabilities are rebalanced each year Provides employers with predictable and budget-able contributions Employers assume non-investment risks Employees assume investment risks (mitigated by a stabilization reserve) Employees have access to regular upside benefit improvements 6

7. Bargaining Parties Negotiated VAPP Design and Costs Effective dates for legacy plan freeze and VAPP start-up Base accrual rates Contribution rates (actuarial rates that buy the accrued benefits) Investment hurdle rate Eligibility rules Ancillary benefits (e.g. early retirement, disability, and forms of retirement) 7

8. Presenter Contact Information: David S. Blitzstein Blitzstein Consulting LLC www.blitzsteinconsulting.com. david@blitzsteinconsulting.com 8