49 Auto Way
Pittsburgh, PA 15206
Summary Plan Description
Amendments to Pension
May 11, 2006
The Board of Trustees ("Trustees") of the Western Pennsylvania Teamsters and Employers Pension Fund ("Pension Fund") has for the last two years been reviewing and monitoring the financial condition of the Pension Fund. As part of that review, the Trustees have requested that the Pension Fund Actuary, the Pension Fund Investment Consultant, and the other Pension Fund Consultants prepare various studies and reports assessing the Pension Fund's financial condition.
As the result of the studies and reports prepared by the Pension Fund Consultants, the Trustees decided to maintain existing benefit levels and accruals for as long as possible, despite bad investment markets. However, because of the cumulative effect of the poor investment market performance during 2000, 2001, 2002 and 2005, the Trustees have concluded that action must be taken now in order to ensure that the Pension Fund does not fall below the minimum funding standards required by federal law, and to ensure that the Pension Fund continues to maintain financial solvency.
The assets of the Pension Fund, consisting of investments in the financial markets, are maintained in investments recommended by the Pension Fund Investment Consultant. During 2000, 2001 and 2002, the stock market witnessed one of the largest declines in history, and all pension plans in the United States, including the Pension Fund, suffered because of the decline. Despite relatively good returns (compared to other pension funds) during those years, the investment returns realized by the Pension Fund still fell below the 8.0% return assumption that the Pension Fund needs to meet its current benefit payments and future liabilities. The following chart illustrates the effect that the investment returns in 2000, 2001, 2002 and 2005 had on the Pension Fund's assets, despite better returns in 2003 and 2004:
As is evident, despite investment returns of 23.9% in 2003 and 12.2% in 2004, which were in excess of the assumed investment return of 8.0%, those returns were not sufficient to make up the cumulative investment underperformance realized by the Pension Fund in 2000, 2001, 2002 and 2005.
The decrease in the Pension Fund's assets during 2000, 2001 and 2002 was almost without precedent and could not have been anticipated by the Pension Fund Actuary, the Pension Fund Investment Consultant or by the Trustees. Due to the decrease in the Pension Fund's assets, and based upon the current value of the Pension Fund's assets and the actuarial projection as to what those assets will grow to over the years, the Pension Fund Actuary has advised the Trustees that unless and until the financial markets significantly improve, the Pension Fund must make certain changes to the rules governing the calculation of the pension benefits.
In an effort to improve the Pension Fund's investment returns, the Trustees, based upon recommendations provided by the Pension Fund Investment Consultant, have invested in a diversified portfolio of equity and fixed income securities, real estate, and other investment vehicles.
Acting upon the Pension Fund Actuary's recommendation, and following the resolution of motions concerning this matter deadlocked between the Union Trustees and the Employer Trustees, the Trustees have made a difficult decision and have adopted an Amendment providing that effective July 1, 2006 the Unit Multiplier utilized to calculate a participant's monthly benefit will be changed to a Unit Multiplier that is 2% of the contributions made by a Contributing Employer on the participant's behalf. This change will apply only to a participant whose current Unit Multiplier is greater than 2% of the contributions made on the participant's behalf.
The Amendment will be effective for service on and after July 1, 2006, and will apply to the contributions received with respect to such service. The changes that will be effective July 1, 2006, including examples, are detailed on the following pages. IT IS IMPORTANT TO NOTE THAT THIS AMENDMENT WILL NOT IMPACT OR CHANGE THE PENSION BENEFITS EACH PARTICIPANT HAS ACCRUED PRIOR TO JULY 1, 2006, AND WILL NOT AFFECT OR CHANGE THE PENSION BENEFITS CURRENTLY RECEIVED OR ACCRUED BY ANY RETIREES, PARTICIPANTS OR DEFERRED VESTED PARTICIPANTS.
The Trustees regret having to take this action, but the action is necessary to protect future benefit security for all parti-cipants by ensuring the long term stability of the Pension Fund. The changes will slow the rate at which benefits are earned in the future, and is the most prudent way to safeguard the benefits already earned by current participants and retirees - and those who retire in the future.
It should be noted that many pension funds throughout the United States, including many different crafts, have made similar changes to the calculation of pension benefits. For example, pension funds covering Teamster members that have made such benefit changes include the Central States Southeast and Southwest Areas Pension Fund, the Western Conference of Teamsters Pension Trust, the New England Teamsters Trucking Industry Fund, and the Southwestern Pennsylvania and Western Maryland Area Teamsters & Employers Pension Fund.
The Trustees will continue to review the Pension Fund's benefit levels on a yearly basis and will make such changes as may be necessary in order to keep the Pension Fund on a sound financial footing. However, please note that in the event that the financial markets do not significantly improve, it will be necessary for the Trustees to take action in future years to provide further changes and reductions in the calculation of the pension benefits. It should also be noted that further changes and reductions in the calculation of the pension benefits may be required due to future Federal legislation that may affect pension funding matters.
Summary Of Changes Effective July 1, 2006
The Trustees, at their May 10, 2006 meeting, adopted changes that will affect a participant's future benefit accruals with the Pension Fund. NONE OF THESE CHANGES, WHICH ARE SET FORTH BELOW, WILL AFFECT THE BENEFITS A PARTICIPANT EARNED PRIOR TO JULY 1, 2006. The changes that will take place effective July 1, 2006 are summarized as follows:
1. The method of calculating the Unit Multiplier for service earned on and after July 1, 2006 will be changed to a Unit Multiplier based on 2% of the contributions made by a Contributing Employer on a participant's behalf. This change will apply only to a participant whose current Unit Multiplier is greater than 2% of the contributions made on the participant's behalf. However, if the participant's current Unit Multiplier is less than 2% of the contributions made on the participant's behalf, the Unit Multiplier will not change.
Please remember that this change in the calculation of pension benefits only applies to a participant whose current Unit Multiplier exceeds 2% of the contributions made on the participant's behalf.
A participant who is not covered by the above Examples can request the calculation of the 2% Unit Multiplier by contacting the Pension Fund Office at the address and phone number listed below.
2. The 2% Unit Multiplier will have no effect upon the eligibility and the benefit calculation rules for attainment of the $1,500, $2,000 or $2,500 Monthly 25-And-Out Benefits, or the $2,000, $2,500, $3,000 or $3,500 30-And-Out Benefits, except if a Unit Multiplier is utilized to add additional benefits to those amounts for service earned on and after July 1, 2006.
However, the 2% Unit Multiplier will be applicable for any service earned on and after July 1, 2006 utilized to determine a 25-And-Out or a 30-And-Out accrued benefit.
Pursuant to Section 204(h) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), this Notice is intended to provide the Pension Fund participants with notice of the changes, effective July 1, 2006, resulting from the Amendment to the Pension Plan.
If there are any questions concerning the Amendment to the Pension Plan, or the information provided in this Notice, please contact the Trustees at the following address and phone number: Board of Trustees, Western Pennsylvania Teamsters and Employers Pension Fund, 49 Auto Way, Pittsburgh, PA 15206-3663, 1-800-362-4201.
TRUSTEES OF THE WESTERN PENNSYLVANIA