EXCLUSIVE: Despite the epidemic, the $3.65 billion Pension Plan is in good condition and has improved financially in each of the past three years, according to the Plan's latest funding notice, which demonstrates that its funding level of 88% is within the so-called Green Zone. Plans in the Green Zone, which is the most highest level of funding, have a funded percentage which is assets divided by liabilities higher than 80%.
We are pleased to report that the Pension Plan maintained its green zone status for 2021, and that it would continue to remain in the Green Zone for the future, the notice says. Under the discipline of long-term investment criteria, the Pension Plan achieved an average annual return rate of approximately 10% in the last 30 years, and having taken actions as necessary. The Directors are attentive to the financial markets and have taken steps as needed to ensure the long-term viability of the Pension Plan.
In 2019, the Plan covered $3.22 billion in assets and $3.75 billion in liabilities, with a funded percentage of 85.7%. In 2020, it covered $3.41 billion in assets and $3.95 billion in liabilities, for a funded percentage of 86.2%. In 2021, it covered $3.65 billion in assets and $4.11 billion in liabilities, for a funded percentage of 88.0 percent. In other words, assets have grown faster than liabilities in each of the last three years.
The Plan had 19,400 participants and beneficiaries from its initial initial implementation on January 1, 2021, of which 9,338 were current employees; 5,518 were retired and receiving benefits, and 4,544 were retireed or no longer working for the employer.
Every year, the Directors took additional actions to improve the financial condition of the Pension Plan, the statement said. One of the reasons the Plan is in such good health today compared to some of its peers is that while benefits are still in full swing at the current 48.3% rate of contributions up to 6.0 percent compensation, the Directors, out of an abundance of caution, altered the Pension Plan to ensure that any contribution made by contributing employers in excess of 0.0 percent of compensation would not be used to provide additional benefit accruals, but rather to
"This change was made in anticipation of the next Minimum Basic Agreement amendment, which increased the required contribution rate to the Pension Plan from 6% to 7.5% of compensation effective May 2, 2011; 7.75 percent compensation on May 2, 2012; 8% of compensation on January 1, 2014; 10.5% on May 2, 2021; and 11.5% on May 2, 2022. In the most simple terms, all contributions in excess of 6% are being used to improve the plan's financial health.
Pension plans, according to the letter, "are designed to pay out benefits over a very long time," and we have a long-term investment strategy that has allowed the Pension Plan to take advantage of time to navigate difficult financial situations. Financial market fluctuations are a given...The Directors continue to prudently manage the Pension Plan, owing to past history as well as discernable future trends. Investment results and market conditions are being monitored appropriately, and acting prudently.
The Plan claims that it has 40% of its asset allocations in stock, 20.8% in investment grade debt instruments, 8.8% in real estate, 5.7% in high-yield debt instruments, and 24.7% in "other" investments.