Define Base Contribution Rate.

The Base Contribution Rate is the rate that was in effect on September 30, 2008, for each job classification under the agreement at that point in time.

Define Rate Factor.

The Rate Factor includes the 35% increase of the Base Contribution Rate each year over the next five years:

Define Minimum Contribution Rate.

Equal to the Base Contribution Rate multiplied by the Rate Factor for each year. When multiplied by hours, this is the amount due.

What part of the contribution goes where?

Let's say the Base Contribution Rate (rate on September 30, 2008) for Employer XYZ's agreement is $1.00. Beginning January 1, 2010, the contribution rate including the 35% Supplemental Non-Accruing Contribution for Employer XYZ will be $1.35. Of that $1.35, $1.00 will accrue to the benefit of the participant and $0.35 will be the non-accruing portion of the contribution which will not be credited to the participant.

How do I know if the Collective Bargaining Agreement (CBA) has been changed to reflect the Minimum Contribution Rate?

If you are a Field Construction employer and have not received updated information, you should contact the Local or Locals in which you are working directly. If you are unable to contact them, then contact the Employer Contributions Department at the Fund Office by calling 866-342-6555, select Option 3, Option 1, then Option 7 for Pension Funding. Industrial Sector employers will likely be involved in negotiations and should know if the contract has been changed.

Can you provide an example of how to figure the Minimum Contribution Rate for hourly contributions? What if the contribution rate has increased since September 30, 2008?

Regardless of the current rate, the Minimum Contribution Rate is calculated from the Base Contribution Rate (rate on September 30, 2008) and will be the new rate used for all work performed on or after January 1, 2010. The rate will increase 35% of the Base Contribution Rate each year through 2014. For January 2010, the employer would use the rate of $6.75.

How much do employers have to pay?

Employers have to pay the rate in the amended Collective Bargaining Agreement which cannot be lower than the new Minimum Contribution Rate. Let's assume the Base Contribution Rate (rate on September 30, 2008) for Employer XYZ is $1.00. It is January 2010, and the New Minimum Contribution Rate is 135%. Therefore, the employer pays $1.35.

What if we are already paying more than the required Minimum Contribution Rate?

If this is the case, the bargaining parties may wish to modify the agreement to reflect the Minimum Contribution Rate. You may also choose to continue to pay the increased rate with the understanding that any amount above the Base Contribution Rate (rate on September 30, 2008) is considered non-accruing.

Where do we get additional money to pay for the increase?

The Pension Plan Trustees have not mandated how to fund the increase. It is the responsibility of the bargaining parties or the parties to a Participation Agreement to determine how to fund the increase. Employers cannot pay for the increase by deducting it from an employee's paycheck. However, the increase can be handled as a reduction in wages.

What happens if we don't pay the increased contribution rate?

If employers fail to pay the new Minimum Contribution Rates, they will be considered delinquent and the delinquent contributions will be subject to assessments for liquidated damages and interest. The Trustees may also terminate the employer's participation in the Plan. If Plan participation is terminated, an employer may be subject to withdrawal liability.

What is withdrawal liability and what authority requires it?

Withdrawal liability occurs when an employer permanently ceases operations under the Plan or permanently ceases obligations to contribute. In a multiemployer pension fund, there is a flow of contributions and earnings from investments coming into the fund while benefits are being paid out of the fund. The basic function of an actuary is to determine whether the contributions plus future investment earnings are sufficient to fund future benefits. The value of benefits already earned and vested is called the "present value of vested benefits." If the present value of vested benefits is greater than the assets, then the fund has an unfunded vested liability for all participating employers.

Congress enacted the Multiemployer Pension Plan Amendments Act (MPPAA) in 1980. The purpose was to allocate unfunded vested benefits equitably to withdrawing employers by calculating their fair share of the liability on the date of withdrawal. Employers that withdraw, completely or partially, are required to contribute to the Plan a proportionate share of the unfunded vested benefits and future liabilities.

Where does it say the contribution rate can be increased by the Pension Trustees?

The Collective Bargaining Agreement does not state this. However, Amendment 30 to the Trust Agreement allows the Trustees to set minimum contributions. The Trustees have a fiduciary responsibility to ensure adequate funding for the Pension Plan. Additionally, the Remittance Report Form states the employer will be bound by the Trust Agreement. The Trust Agreement gives the Trustees the authority to amend the Plan and through Amendment 30 of the Plan establish minimum contribution rates. Therefore, employers are required to comply with the changes in Amendment 1. Review the Pension Trust Agreement, Amendments 19-29 and Amendment 30 for more information.

Why weren't benefits reduced rather than an increase to contributions?

After careful consideration of the unfunded vested liabilities and the stringent rules imposed by the Pension Protection Act, many alternatives were considered. The Board of Trustees determined an increase in contributions over the next five years would best protect the future of the Boilermaker-Blacksmith National Pension Trust. The Pension Trust is administered by a Board of Trustees composed equally of individuals representing Employers and the Union.

How does the elimination of the 15% SNAC affect employers?

The elimination of the 15% SNAC does not have any effect on employer contributions. For work performed on or after January 1, 2010, participants will receive 100% of the September 30, 2008, Base Contribution Rate accruing to their benefit.

What if we want to pay more than the Minimum Contribution Rate?

You can pay an increased rate with the understanding that any amount above the Base Contribution Rate (rate on September 30, 2008) is non-accruing. The extra amount will not be used in calculating benefits. It will go towards funding the Pension Plan.

Can the Base Contribution Rate be increased or decreased for future contributions?

No. The Base Contribution Rate is always the rate which was in effect on September 30, 2008. It will stay that rate through 2014.

How can I increase the accruing portion?

The accruing portion can only increase after the contribution rate increases to 275% of the Base Contribution Rate in effect on September 30, 2008.

When the new Minimum Contribution Rate is not an even amount, how is rounding handled?

Because the Pension Trust requires a Minimum Contribution Rate, if the bargaining parties decide to use a two decimal rate, the rate must be rounded up to the nearest decimal. For example, if the Base Contribution Rate is $1.06, the new Minimum Contribution Rate in effect starting January 1, 2010 is ($1.06 x 135%) = $1.4310. If bargaining parties choose, the Collective Bargaining Agreement may be amended to round the rate to $1.44.

If we round up the first year, are the future rates based on the rounded amount?

No. It is not required, although it is acceptable. In the table above, the Base Contribution Rate (rate on September 30, 2008) is $0.500. For January 1, 2010, the 35% increase is $0.175. It will increase by $0.175 each year through 2014.

The Minimum Contribution Rate for 2010 is $0.675 ($0.500 + $0.175), but could be rounded  to $0.68. In 2011, the Minimum Contribution Rate is $0.85 and does not require rounding. In 2012, this employer can pay $1.025 or $1.03 if stated in the Collective Bargaining Agreement.

Negotiating parties will decide whether the contribution rate is rounded to two decimals. Contributions should be remitted according to the Collective Bargaining Agreement. This means two employers working under the same Collective Bargaining Agreement must submit contributions as specified in the Collective Bargaining Agreement. That is, one employer cannot pay $0.675 and the other employer pay $0.68.

Will these changes eliminate all unfunded liability by 2014?

No. However, it is projected these changes will keep the Pension Plan Fund in a healthy status and meet the requirements of the Pension Protection Act. The Trustees will continue to work with professional advisors to monitor the Fund's financial health to continue current and future benefit payments. The Board of Trustees has the right to amend or modify the Plan at any time. They are required to review the funding status annually. The Trustees will take future action if necessary to maintain the financial health of the Plan.

How is the Minimum Contribution Rate applied to overtime hours rates?

The 135% Rate Factor is applied to the hourly rate for straight time, the hourly rate for overtime, and the hourly rate for double-time as demonstrated in the table.

How do you calculate the Minimum Contribution Rate for percentage-based contributions?

Determining the new Minimum Contribution Rate for Collective Bargaining Agreements in which contributions are based upon percentage rates is complex. When the contribution rate in the Collective Bargaining Agreement is increased to 135% of the Base Contribution Rate (rate on September 30, 2008) the wages to which the rate is applied must be calculated using wage rates in effect as of September 30, 2008. These wages must be included in the employer's Remittance Report.

As a result of the complexity involved with percentage rates, alternate methods of calculation have been approved by the Board of Trustees. The first method involves converting the percentage Base Contribution Rate (rate on September 30, 2008) into an equivalent hourly rate for each job classification. That rate is then increased by 135% like any other hourly rate. Please note, these rates will not be in the Pension Calculation Tool. The second method uses an alternative percentage rate which is applied to current wages. There may be different rates applied to different job classifications. Both of these alternate methods result in contributions which are equivalent to 135% of the Base Contribution Rate (rate on September 30, 2008) multiplied by the wages using September 30, 2008, wage rates.

The bargaining parties will determine the method to be used and the Collective Bargaining Agreement will be modified accordingly. Employers should contact the Locals directly to establish the correct contribution rate. We encourage bargaining parties to submit your wage/rate sheets and amend Collective Bargaining Agreements to the Employer Contributions Department once they are signed. We will then enter the information into our systems to populate the Pension Calculation Tool.

What happens to the participant's Pension if an employer withdraws?

For participants who are vested, any contributions earned prior to the withdrawal will accrue towards each participant's Pension benefit. However, if the employer withdraws, additional contributions and benefit accruals will cease from that employer. Participants who are not vested could incur a Permanent Break in Covered Employment if contributions cease. A permanent break would result in all contributions being forfeited.

You can submit additional questions to BNFPenQuest@bnf-kc.com.