Fact Check: “Prudent Pension Fund or Secret Stash?”

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The Amalgamated Transit Union (ATU) published another misleading and erroneous ad, and we set the record straight.

Claim: Secret Stash?

Fact: False. Pension funds are in a dedicated trust fund and can’t be used for any other purpose. With a $239 million Unfunded Accrued Actuarial Liability, or another way to say it – $239 million in debt, there are no surplus pension funds. The pension trust is administered by three members of the ATU and three from TriMet, including a Board member – there’s nothing secret about the pension trust.

Claim: “The agency is taking an unnecessarily extreme approach to pension funding.”

Fact: False. Given the fact that TriMet’s union pension is funded at just 59 percent, compared to an average of 75 percent for state and local governments nationwide, we are taking prudent steps to fully fund the pension over the next 15-20 years. Based on industry best practices recommended by the Government Finance Officers Association and other national associations, TriMet’s annual contributions to the pension trust are designed to be stable. Contributions to the trust (normal cost plus level payment of the debt) are designed so that the employer’s annual contributions minus benefit payments to retirees plus investment earnings are enough each year to fund projected payouts and have enough money in the trust to make payments to retirees though the year 2100.

Claim: “At $365 million (as of 6/30/13), the fund is up 16% over the year before.”

Fact: True, primarily due to 13.4 percent earnings on the invested pension funds during the year. It’s not due to TriMet investing more money into the trust fund at the expense of transit service for riders.

Claim: “At $28 Million, payout to retirees is up only 10% over the year before.”

Fact: True. TriMet paid out $28 million in benefits in FY13 compared to $25.76 million in FY12. The increase is based on a growing number of retirees, plus annual cost of living adjustments.

Claim: TriMet intends to continue increasing the fund 16% annually; thus, in 2023 – ten years from now, the amount in the fund will total $1.6 Billion.”

Fact: False. In fact, these numbers are meaningless. We don’t have the resources to fund the pension at that level. The amount TriMet will pay is level funding not a 16 percent annual increase. As of September 1, 2012, the Defined Benefit plan is now closed, and based on the Accrued Actuarial Liability, we will increase funding to move it to fully funded status over the next 15-20 years.

Claim: “If annual payouts to retirees continue to increase at 10% per year, only $70 million would be paid out to retirees in 2013. The potential difference: a $1.53 Billion pension fund surplus in 2024.

Fact: False. More meaningless numbers. The $70 million is an estimate for only one year’s worth of pension payments. The full liability extends over the life of the retiree.  The funding of a pension plan includes money to fund the full life of the pension, not just one year worth of payments. In addition, prudent pension funding principles recommend funding of the full pension liability during the years the employee is working, so that future generations do not have to pay for costs incurred by prior generations.

Claim: “…spending millions on light rail expansion and hi-tech toys” at the expense of workers. 

Fact: False. The region’s sixth MAX light rail line now under construction is the $1.49 billion Portland-Milwaukie Light Rail Transit Project. TriMet’s share is less than 5 percent of capital costs, but will result in more cost-effective and faster travel times for riders. The ATU leadership continues to blast this regional decision but forgets to mention that more operators, mechanics and other personnel will be joining the union ranks. Plus, union employee wages and benefits per capita are among the most generous compared to 11 of our peers.

Claim: “TriMet wants passengers to accept fare increases and service cuts” at the expense of workers.

Fact: False. Fortunately, riders have seen $2.1 million in bus service improvements and no fare increases this year as we emerge from the recession and begin to reform the union contract and realign unsustainable benefit costs. TriMet is also looking to add another $3.1 million in bus service improvements in March 2014. Again, union employee wages and benefits per capita are among the most generous in the transit industry.

Claim: When asked why TriMet was rushing to fill the fund.. the response was “There might be an earthquake, and we’d lose the payroll tax revenue; or TriMet might go bankrupt.’”

Fact: False. This is a total mischaracterization of a conversation during labor negotiations with the ATU leadership. We never discussed bankruptcy or threatened a loss of payroll tax revenue. The point was that as the number of retirees and costs increase, it’s important to reduce the risk of unplanned disruptions by properly funding the pension plan rather than on a pay-as-you-go basis.

Where we stand

  • TriMet’s proposal for the 2009-2012 contract was selected by an arbitrator in July 2012
  • The award was challenged by the ATU.
  • In July 2013, the award was reaffirmed by the State Employment Relations Board (ERB).
  • The ATU has challenged ERB’s decision.
  • While TriMet has won twice, the ATU continues to fight and the matter is now up to the Court of Appeals to decide, which means resolution could be at least a year away.

We remain committed to working with the ATU leadership to negotiate a contract that is fair and sustainable. It would keep the employees among the highest paid per capita compared with 11 other West Coast transit systems, as well continuing to receive some of the nation’s most generous health care benefits. Realigning benefits would also help us to restore service, as well as expand service to meet the growing needs of our riders and the region.