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This packet includes important information about your Plan in addition to providing certain legally required notices.
Pension plans like the Southern California IBEW-NECA Pension Plan are designed to accumulate contributions and invest them so that sufficient assets are available to pay participant pensions at retirement. It is critical that the Plan be funded properly to continue providing benefits for participants. The Trustees of the Plan have engaged consultants, including actuaries, who certify that the Plan is properly funded under Federal law, utilizing a series of commonly used assumptions such as mortality rates and long-term interest rates that predict future investment performance.
As you know, during 2008 and the beginning of 2009, the U.S. stock market and other global financial markets declined more sharply than we have seen since the Great Depression. While the Plan had diversified its assets among various types of investments, like all other pension funds, the Plan could not avoid being affected by the severe economic downturn and it experienced a significant loss of assets. Even the recovery of the market in recent months was not enough to overcome these financial losses. Our Plan investment return for the year ended June 30, 2009 was -17% following a return of -4% for the previous year. These returns are far below our assumed rate of return of 8% set by the actuaries. As such, the actuaries certified the Plan as critical, as defined in the Pension Protection Act of 2006 for the Plan year beginning July 1, 2009. Accordingly, The Board of Trustees has taken action to help ensure the Plan's long-term financial health. The following material provides details of the various steps needed to comply with a Rehabilitation Plan when a Plan is deemed critical:
Notice of Actuary's Certification of Critical Status: This notice is required by the Federal government to communicate to Plan participants and the bargaining parties that the Plan actuary has certified that the Plan has failed to meet certain financial thresholds and describes in general terms the actions that the Trustees can take and the potential for benefit reductions and additional contributions. Note that the actuary's certification is based on the plan's financial condition as of July 1, 2009, which is one year later than the information contained in the 2008 Annual Funding Notice described below.
Notice of the Adoption of the Rehabilitation Plan: This notice is a required document that informs the bargaining parties that the Trustees have adopted a Rehabilitation Plan.
Summary of Changes Under the Rehabilitation Plan: This summary describes in basic terms the benefit and contribution changes in the Rehabilitation Plan and includes examples under the various alternative benefit schedules.
Rehabilitation Plan: This document sets forth a default schedule and two alternative benefit schedules from which the bargaining parties can choose. These schedules include combinations of benefit reductions and contribution increases that are designed to meet financial benchmarks prescribed in the law. Your bargaining representative will let you know which schedule applies to you once an agreement has been reached.
Plan Amendment Adopting the Rehabilitation Plan: This item is the written documentation of the action taken by the Trustees.
2008 Annual Funding Notice: The enclosed Annual Funding Notice provides detailed information about the status of the Fund, including the fact that the Fund was 86.6% funded as of July 1, 2008, which is the ratio of the Fund's assets to its liabilities. The funded percentage as of July 1, 2009 is 74.7% in the actuary's certification.
The Southern California IBEW-NECA Pension Plan has been providing benefits for Plan Participants without interruption for well over 40 years. For the Plan year ending June 30, 2009, benefit payments totaling more than $90 million were paid to over 5,400 retired Participants and beneficiaries. The Trustees understand that this is a time of uncertainty and concern for participants due to the economic environment, and continue to work with the Fund's professional advisors to monitor carefully the Fund's investments and benefit structure in an effort to provide benefits for years to come. The Trustees are committed to operating the Plan on a financially sound basis and meeting applicable Federal funding requirements.
If you have any questions, please submit your question(s) in writing addressed to the Southern California IBEW-NECA Pension Plan at P.O. Box 910918, Los Angeles, CA 90091. The Trust Fund's Administrative Office may refer technical questions to the Pension Plan Actuary, but will reply to all questions received in writing.
Board of Trustees
Southern California IBEW-NECA Pension Trust Fund