Report on the IAM National Pension Fund 2018 Fund Overview Presentation held Oct 5 2019.

The IAM National Pension Fund has provided retirement benefits for members of the International Association of Machinists and Aerospace Workers and their families since 1971 it is supposed to cover what is call a Core retirement age of 65.       In the 1990’s the government decided that the Fund had too much surplus, so they mandated that the fund provide Subsidies to let members draw their unemployment earlier than the Core retirement age of 65.  Some of the subsidies were 30 AND OUT / 20 AND AGE 62 / DISABILITY PENSION BENEFITS Allowing personnel that met the requirements to retire with full benefits prior to the core age of 65.

The beginning of the downward trend started with the dot com market crash of 2000.  The trustees implemented schedule “B” with reduced future accruals for new employer groups joining the fund after Jan 1, 2003.  In 2008 the market crashed again, so the trustees made 3 changes first they de-risked the investments. Secondly, they took advantage of a special provision made available under federal law to amortize to the 2008 investment losses over 10 years. Thirdly the trustees required all employer groups in the fund to be moved to schedule “B” no later than Jan 1, 2014, it was felt that these changes were necessary for the long-term health of the fund.  The fund is still the 5th largest multiemployer defined benefit pension plan in the U.S. with about $12 billion in assets.  In 2018 the fund paid out $760 Million in benefits, to more than 100,000 recipients.  The fund is now considered a mature fund which means that it pays out more than is received in contributions for active employees.

There are two pension acts that are being utilized first is the Pension Protection Act (PPA) secondly is the Multi-Employer Pension Reform Act (MEPRA) – PPA – Yellow Zone plans are required to adopt a Funding Improvement Plan / Red Zone plans are required to adopt a Rehabilitation Plan – MEPRA – Allows voluntary election of Red Zone status for Plans projected to be critical / Voluntary election allows access to tools to strengthen Fund earlier than otherwise allowable. / Only Deep Red Plans under MEPRA can cut retiree payments after approval by the Secretary of Treasury.  / Plans cannot voluntarily elect Deep Red status

APRIL 17, 2019 Board voluntarily elected Red Zone status and adopted a Rehabilitation Plan with the goal of

Rebuilding the credit balance & bolster long-term stability to protect the core retirement benefit of all Plan participants.  Immediate Impact of Red Zone Status April 26, 2019 as required by Federal law Eliminated the following subsidies: Disability Pension Auxiliary Benefit / Lump Sum Death Benefit / Social Security Option / Partial Lump Sum Option / Small Pensions / Return to Employment Lump Sum.

Depending on your retirement date the form may be different than the previous version as the subsidies are removed.  Participants MAY still be eligible for Lump Sum Payment forms.

A Rehabilitation Plan is designed to use benefit changes and additional employer contributions to bring a plan back into the green zone over a ten-year period. The effective start date for the 10 year rehabilitation plan is 01 01 2022

Employer Surcharge Overview – The surcharge is required by law- 5% surcharge effective with hours worked on or after June 1 2019 / Surcharge increases to 10% after December 31 2019 until a rehabilitation plan schedule is adopted / Surcharge stops and is replaced with the additional employer contributions for either the rehabilitation plans adopted / Adopting on or before June 1 2019 will avoid all extra surcharges.  There are two plans to choose from “the Default Plan -gov’t plan” and the Preferred Plan – trustee plan”   So far 44 out of 52 employers have chosen the Preferred Plan, All of the  employers that deal with our lodge have selected the Preferred Plan or did not join the pension and went with a 401K plan instead.  I am not going to have the data on the Default Schedule it is not being used in our area.

Key Points to Understand

The Rehabilitation Plan aims to rebuild the credit balance & bolster long-term stability to protect the core retirement benefit of all Plan participants

Participants are not losing any benefit accruals already earned / Current retirees are not impacted /

Changes will impact both participants and employers / Changes are primarily focused on subsidized early retirement benefits

Rate of Future Benefit Accruals Remains the Same

ALL EARLY RETIREMENT PENSION BENEFIT SUBSIDIES ARE REMOVED, EFFECTIVE WITH RETIREMENTS ON OR AFTER JAN. 1, 2022

ADDITIONAL ANNUALLY-COMPOUNDING EMPLOYER CONTRIBUTIONS OF 2.5%

Service earned prior to Schedule adoption or imposition remains subsidy eligible

Credited Service earned after Schedule adoption or imposition will be subject to the revised age reductions

 Early Retirement Provision

Current                                                                                  Preferred (New)                                                       Age 55 or older                                              Early retirement age reduction factor is no longer subsidized

At least 5 years of credited service              Can still retire prior to age 65 before Jan 1 2022 with a subsidy eligible credited service earned prior to Schedule adoption        

Early retirement age-reduction factors      After Jan 1 2022 the early retirement will be with the revised are partially subsidized                                age reduction factors

ie… 62 year old pay would be $1,000 monthly                   ie… 62 year old pay would be $723 monthly

Now there are EARLY RETIREMENT AGE REDUCTION FACTORS – Current Age Reduction Factors: 4.8%

20 and Age 62 Pension                          

Current                                                                                 Preferred (New)                                                       Age 62                                                                                    Same as above

20 years of credited service             

Unreduced (subsidized) early-retirement benefit

 30 and Out Unreduced Pension                                                                                                   Current                                                                                  Preferred (New)                                                          30 years of credited service regardless of age                   Same as above                                                                     Unreduced (subsidized) early-retirement benefit

Disability Pension                                                                                                                             Current                                                                                  Preferred (New)                                                            5 years of credited or vesting service, regardless of age               Same as above                                                      Unreduced (subsidized) early-retirement benefit

 Normal Form of Payment for Unmarried Participants                                                          Current                                                                                  Preferred (New)                                                    Single Life Annuity with 60 Certain Payments                                Single Life Annuity Remains available

60 Certain Payment option is eliminated for retirements on or after Jan. 1, 2022

 Rehabilitation Plan Effective Date SEPT 1 2019 Standard Adoption – CBA – Required Adoption for CBAs in effect on April 17, 2019, that expire on or after September 1, 2019 Within 180 days of CBA expiration. / PA – If PA is linked to CBA, CBA adoption requirements apply.  If stand-alone PA, adoption requirement is January 1, 2020. / Early Adoption Option – This is what our employers have chosen – Adopting prior to June 1 avoids all PPA surcharges.  Additional employer contributions for all hours on or after June 1. / CBA Currently in Effect is Renewed Prior to Sept. 1, 2019 – Not required to adopt Rehabilitation Plan until renewed CBA expires.  May adopt early.  Renewal CBA may not be designed to evade the Rehabilitation Plan. / CBAs expiring after Sept. 1, 2019 – Must adopt Rehabilitation Plan within 180 days of the CBAs expiration date.  For example, if the CBA expires on Nov. 1, 2019. The Rehabilitation Plan must be adopted by April 29, 2020. /

Adoption or Imposition – The terms of the Rehabilitation Plan and Schedules are not negotiable. / Once either the Preferred or the Default Schedule is elected or imposed, parties may not change Schedules. / The Parties may not elect a Rehabilitation Plan and Schedule with a retroactive or prospective adoption date. / An employer cannot unilaterally impose a Rehabilitation Plan Schedule by bargaining to impasse. /

Adoption Documentation – Once adoption is made, the parties must provide one of the following to the IAM National Pension Fund: MODEL ADOPTION LANGUAGE / MEMORANDUM OF AGREEMENT / LETTER OF UNDERSTANDING / RESOLUTION TEMPLATE / COLLECTIVE BARGAINING AGREEMENT / There are no changes to the Standard Contract Language. / Withdrawal Liability – There are no changes to the Plan’s withdrawal liability rules as a result of the Rehabilitation Plan, including those related to Service Contract employers

Deferred Vested – Deferred vested participants, whose last employer no longer participates in the Plan, will be placed in the Preferred Schedule on Sep. 1, 2019. / Deferred vested participants, whose last employer continues to participate in the Plan, will be placed in the Rehabilitation Plan Schedule elected by or imposed on the bargaining parties (CBA) or their last participating employer (PA). / Deferred vested participants whose employer leaves the Fund after Sep. 1, 2019 without adopting the Rehabilitation Plan will be covered by the Preferred Schedule effective on date of withdrawal.

 Merged Plans – Early retirement subsidies, 60 certain payment guarantees, and excess death benefits not yet in pay status will be modified consistent with the Rehabilitation Plan and Schedule adopted or imposed on the bargaining parties or employer. / Additional details regarding the specific benefits affected and the effective date will be provided in an addendum to the Rehabilitation Plan. Advanced notice of specific changes will be provided. / The payment forms required to be eliminated by law are eliminated under the Rehabilitation Plan as of April 26, 2019

Can the Rehabilitation Plan be adjusted by the Board of Trustees? The Rehabilitation Plan was designed by the Board, in accordance with regulatory requirements using reasonable assumptions, to have the Plan emerge back into the green zone over the ten-year Rehabilitation period. / The Rehabilitation Plan requires annual evaluation by the Board. / If after three consecutive years the Rehabilitation Plan is determined to not be meeting the objective, the Board would be required to take additional action. / If the Board is required to make changes to the Rehabilitation Plan, those changes must be presented to the bargaining parties for adoption.

Retirement and Return to Work – The Plan’s Disqualifying Employment rules remain in place and unchanged. In general: If a participant retires from a participating employer prior to Jan. 1, 2022 under the Preferred Schedule and subsequently returns to work in disqualifying employment, the participant’s subsidized benefit will be suspended during that period. When the participant again stops working, their subsidized benefit will be reinstated. / If a participant retires prior to Jan. 1, 2022 under the Preferred Schedule and immediately, or in the short term, returns to work for the same participating employer, in any job classification, this may be deemed to be a “sham” retirement, which has been addressed by the IRS in a Private Letter Ruling. Cover yourself contact the IAM National Pension Fund Representative.

The Rehabilitation Plan was designed to protect the core retirement benefit of all Plan participants.

I took information from the IAMNPF.ORG website and the 105-page PowerPoint that was given at the presentation.  The takeaway is that if you have earned a subsidized early retirement that you qualify for prior to 30 November 2021 then you can still retire early with full benefits as long as you put in for your retirement by the cutoff date of 30 Nov 2021..  For those that will not meet the requirements prior to 30 Nov 2021 then the age reduction factors will be included. Currently it is 4.8% if you retire prior to age 65.  If you have questions that this report did not answer, please contact IAM National Pension Fund Representatives their Phone: 1-800-424-9608 for participants, the phones are open Monday through Friday, 900 a.m. to 7:00p.m. Eastern Time.  Mail: IAM National Pension Fund, 1300 Connecticut Avenue, NW, Suite 300, Washington, DC 20036-1711.

MORE RESOURCES AVAILABLE: http://iambfo.org and https://www.iamnpf.org

From the latest BENEFITS SPOTLIGHT that was mailed out Jan 2020.  Don’t wait until it is too late Applying early matters! Participants can submit their application 180 days before retirement.

Tax forms Should be available now