In a Special Report from Local 302 entitled “Employer Trustees block pension increase again”, it was suggested that the Employer Trustees have concluded that “raising your pension benefit is not in your best interest”. Further it implies that they are insensitive to the plight of the participants and their dependents in this difficult economic downturn. Nothing could be further from the truth. We appreciate the opportunity in this document to explain why.

RECENT HISTORY OF PLAN FUNDING
AND DISTRIBUTION LEVELS

Before the Pension Protection Act of 2006, funding rules required pension plans, such as yours, to spend funds in excess of 100% of current liabilities (as determined by the Plan actuaries) if contributions were to be fully deductible. Prior to this legislation the Trust was not allowed to accumulate any reserves and was vulnerable to volatile conditions in the security markets. This vulnerability was demonstrated by the post 9-11 and “tech bubble” market downturns, which did serious damage to the solvency of the Plan. This resulted in what is known as an unfunded liability.

An unfunded liability means that the Plan has more liabilities than money. The Plan had an estimated funding status of 98% on January 1, 2008. So, what does that really mean? The short answer is that the Plan is estimated to have $63 million more in liabilities than it has in assets. It was this unfunded status which originally led all of your Plan Trustees to reduce the accrual level to the 1.5% “damage control” rate stated in the Union’s Report.

The Employer Trustees do not believe that it makes sense to increase benefits when the Plan does not have the money to cover its current liabilities. The Pension Protection Act revised the funding rules to allow the Trust to retain reserves. Therefore, we believe that it is prudent and responsible to build a modest reserve to protect against fluctuations or losses in the security markets. We think the precise amount of such a reserve must be determined on a meeting-to-meeting basis and we feel that it would not only be difficult but ill advised to set a fixed amount of such a reserve or to speculate as to what it might be.


It is only natural for Plan participants to want to see the recent increases in contributions lead to an immediate increase in benefits. However, contributions are only one of the elements affecting the financial health of the Plan. Given the size of the Plan (over $2.6 billion), the effects of the investment markets weigh far more heavily in the equation than do contributions when determining the overall performance of the Plan. Though contribution levels are certainly important to long term Plan health, short term benefit level decisions are more certain to be dictated by investment returns.


FIDUCIARY RESPONSIBILITIES

The fiduciary responsibility owed by all Plan Trustees requires them to use the utmost good faith and prudent judgment in the management of the Plan and to discharge their duties solely in the interest of the participants and beneficiaries of the Plan. While we are certainly sympathetic to the plight of retirees on fixed incomes in a time of spiking inflation, our fiduciary duty will not allow us to compromise the solvency of the Plan by making premature decisions on funding and benefit levels. It is our desire to strive for providing stability and predictability to the Plan and its participants and to avoid, to the greatest extent possible, wild swings in funding levels. The maintenance of the current benefit levels until the plan becomes fully funded, coupled with the establishment of a reasonable reserve, will help provide the flexibility necessary to weather the volatility of the market without imposing upon the participants of the Plan radical and unpredictable swings in benefit levels.

CONCLUSION

As stated in the Union’s Report, all Trustees are required to hang their “management” or “union” hats at the door when they assume the role of Trustee. It is unfortunate that the disagreement discussed in the Union Report and replied to in this response appears to take on ideological lines. The fiduciary must not see the world through union or management glasses. His obligation cannot be diluted, compromised or overshadowed by the role he assumes for the remainder of the day. When he assumes the role of Trustee he must make his decisions and cast his votes in the best interests of the Plan and its participants, both present and future.

The so called “Management” Trustees recognize quite clearly that the Fund for which they are fiduciaries is for the benefit of the participants. They have no axe to grind nor profit to gain through the decisions they make with respect to the Plan. Their interests are exclusively for the long term health of the Plan for today’s and tomorrow’s participants. Perhaps it is this independence that allows them to more clearly see and more readily apply their fiduciary responsibilities.

We appreciate the opportunity to explain our actions, both for today and in the future. You may rest assured that we take our fiduciary responsibility very seriously and that we will continue to do our utmost to preserve and protect the solvency of the Plan for many generations to come. We hope that this response will help with your understanding of our actions in this regard.

Respectively Submitted by
Doug Peterson
Brett Ferullo
Mike Tucci
Richard Dickson
Mike Miller