April 15, 2015: Central States Pension Fund Director is giving the hard sell on his fast-track pension cuts, but withholding all the information members need to formulate alternatives.
He states the plan will go broke in exactly 11 years, and says we cannot question his facts. Where does he get this figure? And why hasn’t it changed as the fund’s assets have gone up?
Taking the fund’s current level of employer contributions and benefit pay-out, and the fund’s standard assumption of 8% average return on investment, it would be 17 years (2032) before the fund would go insolvent, according to Chart #1 below.
That’s still a disaster which we cannot let happen, but it is more evidence that we want a full review by independent actuaries and experts of our fund.
Nyhan, in a speech to officials in Rosemont Illinois on April 8, suddenly “moved the goalposts” to change the CSPF’s projected return from its long-standing policy of 8% per year to 7% per year. So we prepared Chart #2 using a 7% assumption for investment returns—this leads to a projected insolvency in 15 years.
Of course, these charts cannot begin to capture the complexity of the pension fund, but they do indicate why an independent review is needed. How did Nyhan and the Trustees make up the 11 year figure?
We’d all like to see all the facts and assumptions behind the curtain, and have a chance to come up with alternatives. Members and retirees deserve no less.
Chart #1: Central States Fund Potential Decline
Assumption: Employer contributions do not increase, pension benefits are not cut, the same management is in place, and the CSPF’s policy assumption of 8% per year average return on investment. (Actually, benefit payments will likely decline as benefit cuts of recent years take hold.)
Chart #2: Central States Fund Potential Decline – with modified assumption of only 7% average return on investment.
We cannot allow anything like this to happen. But where did Nyhan cook up the 11 year claim? We demand a review.