The Co-op Retirement Plan Committee and United Benefits Group sponsored its ninth round of annual Winter Meetings from January 26 to March 30.  We thank all those who drove many miles to come to one of the eleven meetings - your attendance was much appreciated.  For those of you who could not attend due to weather or other issues I offer this brief summary of the topics discussed at this year’s meetings:

As you know by now, the Plan experienced another solid investment year which allowed the Retirement Committee to lower the  total contribution rate of the Plan by one percentage point effective  July 1, 2011.  This is the second straight year that the contribution rate has decreased, and it’s worth noting that the total contribution rate for the period beginning July 1, 2011 will be fully 3.2% (of covered payroll) less than two years ago.  This reflects the excellent recovery the Plan has experienced since the severe market downturn of 2008-2009. 

The two main factors that affect the contribution rate of the Plan are investment performance and interest rates.  Because the liabilities of the Plan (the promised benefits) have such a long duration, in any given year, interest rates can have significantly more impact  on plan funding than  does investment performance.  We have been discussing interest rates and their impact on the Retirement Plan in all of the 104 Winter Meetings we have held in the last nine years.  To put it simply, lower interest rates will normally result in higher contribution rates and higher interest rates will normally result in lower contribution rates.  Inasmuch as interest rates have been historically low for the last ten years, it’s no surprise that the Plan has been historically expensive during that period.  The fact that contribution rates have dropped for two straight years is almost entirely due to good investment performance since long-term interest rates have remained fairly static during that period.  If we ever see long-term corporate bond rates start to rise it will probably signal additional decreases in the Plan’s contribution rates, although the Retirement Committee will always act prudently to keep the contribution rate at a level sufficient to keep the Plan well-funded.

That being said, our Participating Employers already have a considerable amount of control over their Retirement Plan costs because of their ability to choose benefit accrual rates and employee contribution rates for their particular organization.  Statistics regarding those employer choices were shown at the Winter Meeting.  Specifically, the following chart was exhibited which shows how many Participating Employers chose a particular combination of a benefit accrual rate and an employee contribution rate as of last year’s election:

For example, the most popular combination last year was the 1.25% benefit accrual rate with a 3.0% employee contribution rate, chosen by 123 employers.   The second most popular option was a 1.75% benefit accrual rate with a 3.0% employee contribution rate, chosen by 85 employers.  Overall, 47.4% of the Plan’s employers currently have a 1.25% accrual rate, 42.4% have a 1.75% accrual rate, 8.4% have a 1.50% accrual rate, and 1.7% elected the new 1.0% accrual rate.   As for the employee contribution rate, fully 96% of all employers currently ask their employees to contribute at a rate of 3.0% or greater.

What is the trend for this year’s Rate Choice Election?  At the time of this writing we have received about 47% of all election forms, of which 87% have indicated no change from last year with the rest generally either raising their benefit accrual rate or lowering their employee contribution rate.

ONGOING BENEFIT OF OUR SPECIAL PPA’06 EXEMPTIONS

Another significant reason why the contribution rates of the Plan have avoided the extreme volatility experienced by other plans is the special exemption granted to multiple-employer plans of certain cooperatives in the Pension Protection Act of 2006.  As discussed in this year’s Winter Meetings, the three big advantages for our plan resulting from the PPA’06 exemptions are:

1.       Having ten years to reach the new, higher federal funding target of 100%.

2.       Being able to use a higher interest rate to value the plan’s liabilities.

3.       Being able to smooth asset levels over a longer time frame.

The practical result of these advantages has been a much smoother contribution pattern and significantly, the avoidance of crippling spikes in contributions that have burdened other plans.  We feel fortunate to report that, in the defined-benefit universe, it would appear that the greatest stability is currently found in the cooperative, multiple-employer format.

NEW EMPLOYEE WEBSITE

The announcement of a new website for participants generated much interest in the Winter Meetings.  This website, which is only in the early stages of development, will be designed  not only to inform participants on their current level of accrued benefits, but will also give them the means to look forward into the future to see how valuable their benefit will become if they remain in the Plan.  The intended goal of the website is to increase employee appreciation for the Plan and to make your employees think twice before leaving your company to work somewhere outside of the Co-op Retirement Plan system.  Completion of the website is expected before the end of 2011.

WHAT DO YOU THINK ABOUT THE WINTER MEETINGS?

After nine years of Winter Meetings we would be very grateful to you if you could answer two simple questions for us:

1.       WHAT ARE YOU TIRED OF HEARING ABOUT IN THE WINTER MEETINGS?

2.       WHAT WOULD YOU LIKE TO HEAR MORE ABOUT?

3.       DO YOU HAVE ANY OTHER SUGGESTIONS THAT WE SHOULD CONSIDER WITH RESPECT TO PLANNING FOR NEXT YEAR’S  WINTER MEETINGS?

If you would kindly respond to this e-mail with your answers it will help us increase the quality and relevance of the Winter Meetings.

Again, it was good to see all of you this year and we wish much success for your organization in the year to come.