There really isn't anything nefarious or terribly hard to understand about the pension problem. Fixes, now there's a tough problem.
Too many retirees, not enough active working contributors to cover the retirement payouts.
The fund increased the payout in direct response to the pressure applied to it in matching the UPS promises during their take over attempt of it in '97 contracts.
That was great as a future promise and for retirees at the time.
However, that immediately made for a substantial shortfall between what companies were contributing and what was needed to pay the retirees.
At that point the fund (both company and union) needed to figure out how to shrink the difference.
The active ways would be increased company contributions per employee (there is a limit here and would be different for every company(read that as a new bracket for UPS employees), but still there would be a limit and couldn't come close to covering the imbalance, but could help) and to increase the amount of active contributing members.
In other words "grow" the union base, either through increased membership at the existing companies and unionizing more companies.
In regards to UPS, not a problem, elsewhere however. . .
The trend went the other way.
That left doing well in the stock market as the short term make up answer.
Targeting an average of 8% profit per year while not conservative was with in the realm of reason as that is the historical average for the stock market.
However, due to the trend of less active workers, more retirees, even that target was treading water at best.
The results were predictable. Ultimately the stock market would go bear and with the other negative trends the music would have to be faced.
We are there.
The only reason why it wasn't until 2003 rather than 2002 (the fund dropped from mid 18 billion to low 15 billion) is the fund tried to avoid reality as long as possible. BTW, this was a great year, around 25% up and it is my understanding the fund is back up around 18 billion again.
The reason why our fund is in trouble and some others are not is mainly a matter of who makes up the fund.
Central States is a "mature" fund that has a higher percentage of retirees and retirees from companies that no longer exist or contribute to the fund.
Funds in better shape did not necessarily do better (or less worse) in the stock market than Central States. They just have more active workers than retirees in respect to Central States.
For the most part that means UPS employees make up a larger percentage of their fund.
Would a fund consisting of all UPS employees be better off? FAR
Can it be done, will it be allowed?
Not without the intercession of UPS.
And it isn't that simple.
What you've earned with the Central States Fund would still be with them. It isn't a matter of just switching over and UPS pays you everything.
In the short term the most effective and most economical thing UPS could do to support UPS employees is to uphold the promises at the medical end of the pension (benefits and premiums) for which they alone are responsible to their employees.
If UPS really wants to protect UPS workers (you know, put your money where your mouth is) they can at the medical end immediately.
Will they?
Who knows, so far it doesn't look good.
(Message edited by Ok2bclever on January 25, 2004)
