Revitalizing the UFCW Minneapolis Pension Plan
Case Study: UFCW
Minneapolis Pension Plan
David Blitzstein, President Blitzstein Consulting LLC
FMCS National Labor-Management Conference
August 22, 2018
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
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
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
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
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
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
Presenter Contact Information:
David S. Blitzstein
Blitzstein Consulting LLC
www.blitzsteinconsulting.com.
david@blitzsteinconsulting.com
8
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.
Download Presentation
Please find below an Image/Link to download the presentation.
The content on the website is provided AS IS for your information and personal use only. It may not be sold, licensed, or shared on other websites without obtaining consent from the author. Download presentation by click this link. If you encounter any issues during the download, it is possible that the publisher has removed the file from their server.
E N D
Presentation Transcript
Case Study: UFCW Minneapolis Pension Plan David Blitzstein, President Blitzstein Consulting LLC FMCS National Labor-Management Conference August 22, 2018
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
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
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
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
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
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
Presenter Contact Information: David S. Blitzstein Blitzstein Consulting LLC www.blitzsteinconsulting.com. david@blitzsteinconsulting.com 8
