Funding Task Force update

The Board of Trustees and the Sponsors’ Committee established a Funding Task Force earlier this year, to carefully consider all possible means of eliminating the deficit the Plan expects to have as of January 1, 2011. The Plan is required to file an actuarial valuation at least every three years, and our next required date is as of January 1, 2011. The Task Force has been meeting approximately once per month, and will continue to do so until early in 2011, when the financial results for 2010 are known. These results will form the basis of the valuation. The deadline for filing the valuation is September 30, 2011.

In proposing funding solutions, the Plan’s governing bodies must consider every option. Members of the Task Force are carefully reviewing all of the potential means of reducing a deficit: increases in contribution rates, reductions in future benefits (those that have not yet been earned), and changes to risk tolerance as defined in actuarial assumptions.

The Task Force is also looking at a request from pensioners that additional inflation protection be provided for service earned in the Plan prior to 1992. Inflation protection for this period was for many years provided on an ad hoc basis: paid if the Plan could afford it. In 2001, when the Plan had a significant surplus, a decision was made to extend ad hoc inflation protection until 2014. Further funding past that date would require additional surplus.

There are now three separate periods in which a member’s years of service qualify for inflation protection. Besides the pre-1992 service period, inflation protection for service from 1992 to 2007 is guaranteed indefinitely and is pre-funded. In the third period, inflation protection for service for years after 2007 is reviewed periodically and is paid subject to available funding. This inflation protection has been paid for the years 2008, 2009, and 2010.

At this time, no decisions have been made concerning any changes. Volatility in the markets makes it impossible to quantify the Plan’s financial position as of January 1, 2011 in advance. Early in 2011, the Task Force will make recommendations concerning the appropriate actions to take. Any resulting changes will be communicated to all Plan members as soon as they are finalized. There will be no changes in contribution rates effective January 1, 2011. Contribution rate increases, if any, would likely be effective January 1, 2012.