Page 19.0

Automotive Industries Pension Plan

Checklist Item #19

Does the application include the plan information required by section 5.02?

Yes. The documentation is attached as Document No. 19.1. Document No. 19.2 is the 

Declaration of Donald Crosatto.
Page 19.1.1

Document No. 19.1

Section 5.02 Plan factors. In accordance with section 432(e)(9)(C)(ii), the following specific 

information with respect to the plan:

For the past 10 plan years immediately preceding the plan year in which the application is 

submitted:

Section 5.02(1)(a) Contribution levels.

Employers make contributions to the Plan pursuant to individual Collective Bargaining 

Agreements or participation agreements. The contribution rates vary among the employers and 

employee classes. The average monthly participant contribution and the yearly total 

contributions over the last ten years are as follows: 

Plan Year Average Monthly Credited 

Participant Contribution Rate 

(Excluding Employer 

Supplemental Contributions)

Total Contributions (Excluding

Employer Supplemental 

Contributions)

2006 $393.84 $29,816,663.22

2007 $404.09 $28,734,442.78

2008 $395.33 $25,819,780.58

2009 $381.89 $22,440,904.39

2010 $394.93 $21,095,264.83

2011 $393.62 $19,736,249.95

2012 $399.53 $19,104,136.83

2013 $405.25 $18,875,105.84

2014 $398.95 $19,051,072.70

2015 $398.43 $18,512,446.26

For collective bargaining agreements effective on or after May 8, 2008 the Trustees prohibited 

any decrease in the contribution rate while the Plan is in Critical Status. 

Section 5.02(1)(b) Levels of benefit accruals, including any prior reductions in the rate of 

benefit accruals.

Due to the Plan’s positive funding status in the 1990s, for retirements effective after January 1, 

1999, the Trustees had increased the accrual rate to 5% for contributions through January 1, 

2005. This accrual rate was set to decrease to 4.24% for contributions after January 1, 2005. 

In consultation with the Plan’s Actuary, and in response to a worsening of the Plan’s funding due 

mainly to poor investment returns over the three previous years, on December 3, 2002, the 

Trustees amended the Plan to reduce the accrual rate to 3% effective for contributions on or after 

July 1, 2003.
Page 19.1.2

As the Plan’s funding status continued to decline, the Trustees again amended the Plan to further 

reduce benefit accruals. Effective January 1, 2005, the Trustee’s prospectively reduced the 

accrual rate to 0.50% for the portion of monthly contributions less than or equal to $250, 1% for 

the portion of monthly contributions between $250 and $500 and 2% for the portion of monthly 

contributions exceeding $500. 

As a part of the Rehabilitation Plan adopted in 2008, the benefit accrual rate was fixed at 1% of 

total contributions made on a participant’s behalf, effective for contributions after July 1, 2008. 

The benefit accrual rate has remained at 1% since July 1, 2008.

Section 5.02(1)(c) Prior reductions, if any, of adjustable benefits under section 432(e)(8).

In 2008, the Plan’s Actuary certified the Plan to be in Critical Status under the Pension 

Protection Act. The Plan adopted a Rehabilitation Plan which would enable the Plan to emerge 

from Critical Status by the end of the 10 year Rehabilitation period beginning January 1, 2011. 

New Collective Bargaining Agreements negotiated after April 27, 2008 had to include the 

maximum benefit reductions allowed by law. The Trustees adopted the following benefit 

reductions in the Rehabilitation Plan:

1) Subsidies for the Early Retirement and Joint and Survivor benefit were eliminated; 

2) The Rule of Unreduced Early Retirement Benefit was eliminated;

3) The Disability Benefit was eliminated;

4) The 36 month guarantee Pre-Retirement Death Benefit was eliminated;

5) All benefit options were eliminated except for the Single Life Annuity (with no death 

benefit) and the unsubsidized QJSA or QPSA.

Effective July 9, 2012, the Trustees adopted an updated Rehabilitation Plan which included an 

additional benefit reduction:

1) Early Retirement Benefit for Inactive Vested participants was eliminated, effective 

February 1, 2011.

Section 5.02(1)(d) Any prior suspension of benefits under § 432(e)(9).

The Trustees have not applied for any prior suspension of benefits under Section 432(e)(9).

Section 5.02(1)(e) Measures undertaken by the plan sponsor to retain or attract 

contributing employers.

The recessions of 2001 and 2008 were particularly harmful to the automotive industry. The 

impact of the recessions, including the General Motors and Chrysler bankruptcies, resulted in the 

closing, bankruptcy or sale of many automotive dealerships, automotive parts retail shops and 

other automotive related businesses in the Bay Area. The Plan declined from 450 individual 
Page 19.1.3

contributing employers in 2000 to 155 in 2015 (the Union does not have any collective 

bargaining agreements with employer associations, only individual employers). Against this 

background of shutdowns and consolidations among the Bay Area automotive dealers, and 

growing unfunded liability (increased from $406,778,532 at the end of 2005 to $790,263,178 at 

the end of 2014), the Trustees were challenged to attract and retain contributing employers to the 

Plan, in addition to taking measures to avoid insolvency. 

Measures taken to attract and retain contributing employers include the following:

1) Adoption of the free look rule – In 2005, the Trustees adopted the free look rule in an 

effort to attract new employers to the Plan. The free look rule allows employers to 

avoid withdrawal liability if they withdraw from the Plan within five years, before the 

time when its employees would vest, along with meeting other specified conditions. 

The free look allows employers to become acclimated to the Plan and hopefully 

remain contributing employers. If the employers do not stay, however, the Plan 

retains the employer’s contributions without the attendant obligations to vested 

participants as to many or all of the employees. Virtually no employers have taken 

advantage of this. 

2) Reduced the employer supplemental contribution rate from 12.5% to 5.0% - In 2008, 

the Trustees adopted the Rehabilitation Plan that imposed cumulative supplemental 

employer contributions of 12.5% per year for 7 years beginning in 2013. 

Supplemental employer contributions increase the monthly contribution rate but do 

not count towards benefit accruals. Therefore, by the final year, 2019, employers 

would have been paying a supplemental rate of 128.1% of the initial contribution. 

By 2012, the Plan’s financial situation had further deteriorated so that the 12.5% 

cumulative supplemental employer contribution would not have been enough to allow 

the Plan to emerge from critical status by the end of the rehabilitation period, instead, 

a 35.8% cumulative increase would have been required. Thus, in the final year, the 

average employer contribution rate would increase from $394 to $3,356 per month. 

Taking into account this new information, the Trustees considered the decline in the 

automotive industry in general, the rapid decline of contributing employers and of 

active participants in the Plan and information concerning the remaining larger 

contributing employers to the Plan. The Trustees also considered the risk of future 

substantial withdrawals, the difficulty collecting withdrawal liability from insolvent 

entities, and the potential adverse impact of such withdrawals. Withdrawal liability 

often fails to fully compensate a plan for its unfunded vested benefits. The 20 year 

cap on withdrawal liability prevents withdrawn employers from paying their entire 

share of withdrawal liability. 
Page 19.1.4

The Trustees also considered that no contributing employer belongs to an employer 

association that negotiates with the Union on behalf of all of its members, so any 

supplemental employer contribution must be negotiated separately for each employer. 

See Declaration of Donald Crosatto (“Crosatto Decl.”), Document No. 19.2, ¶ 12. 

This makes it difficult to impose a rate higher than the amount that the most 

financially vulnerable companies could bear. Many small employers indicated in 

bargaining that a 12.5% would cause them to go out of business or file for 

bankruptcy. Crosatto Decl., Document No. 19.2, ¶ 6. The Trustees were convinced 

that the 12.5% supplemental contribution rate would cause the 3 largest employers to 

leave which could lead to a mass withdrawal. Crosatto Decl., Document No. 19.2, ¶ 

7. Accordingly, in 2012 the Trustees revised the Rehabilitation Plan supplemental 

contribution rate downward from 12.5% to 5.0%, concluding that annual contribution 

rate increases greater than 5.0% could trigger mass withdrawals and significant losses 

to the Plan. To date, no mass withdrawal has occurred and the largest contributing 

employers have remained in the Plan.

(2) The impact on plan solvency of the subsidies and ancillary benefits, if any, available to 

active participants. 

Not applicable, as there are no longer any subsidies or ancillary benefits available to active 

participants.

(3) Compensation levels of active participants relative to employees in the participants’ 

industry generally. 

In the Plan’s geographic area, industry competition has impeded wage growth for Union 

members, although overall compensation costs for union members are higher due to better 

benefits. Crosatto Decl., Document No. 19.2, ¶ 15. 

The rising costs of pension benefits have caused a downward pressure on Union wages in 

general. Employers have experienced rising pension costs due to the cumulative supplemental 

employer contributions imposed by the Rehabilitation Plan, which took effect on January 1, 

2013. Since cumulative supplemental employer contributions are scheduled to increase each 

year through 2019, the overall pension costs will continue to rise. This increase in the pension 

costs has come out of the non-pension portions of the total compensation package and led to 

slower wage growth for participants.

At the same time, Plan participants have experienced a reduction in the amount of pension 

benefit accruals they could expect to receive for each dollar contributed on their behalf along 

with the reduction or elimination of other benefits, as described above. The confluence of the 

cumulative supplemental employer contributions and the benefit reductions has meant that an 

increasing portion of pension contributions are being used to pay unfunded pension obligations, 
Page 19.1.5

which has led to a decline in support for the Plan among active participants and made it more 

difficult to attract and retain contributing employers. Crosatto Decl., Document No. 19.2, ¶ 11 –

13.

(4) Competitive and other economic factors facing contributing employers. 

The decline over the last 10 years in the domestic automotive industry coupled with the 

economic recessions over the last 15 years have had a great impact on the businesses, especially 

automotive related businesses, in the Union’s jurisdiction. Plan employers are engaged in a 

fragmented, competitive industry and have higher labor costs. Consequently, employers must 

either charge more for the same services, resulting in less business, or endure smaller profit 

margins. Specifically, these occurrences led to the closure of many of the local auto dealerships 

and retail parts shops in the San Francisco Bay Area, which employed a significant portion of 

our participants. Crosatto Decl., Document No. 19.2, ¶ 2.

Thus, the Plan has lost many contributing employers over the last 10-15 years. For example, 

1. In 2000, there were approximately 16 Ford and 10 Chrysler dealerships in the East 

Bay contributing to the Plan. In 2015, only 3 of those East Bay dealerships remain as 

contributing employers to the Plan.

2. The Union used to represent a large retail automotive parts industry but many of those 

employers have gone out of business. For example, at one time, Grand Auto Supply 

employed approximately 600 Plan participants. Now, the company no longer exists. 

Crosatto Decl., Document No. 19.2, ¶ 3.

Employers, including several of the largest employers, have openly contemplated withdrawing 

from the Plan. Factors affecting an employer’s decision to withdraw from the Plan include 

alleviating the economic burden imposed by the Rehabilitation Plan supplemental contributions, 

eliminating the withdrawal liability reported on an employer’s financial statements and taking 

advantage of the 20 year cap currently imposed on the withdrawal liability calculation. The 

Union has had to expend considerable effort in encouraging employers to stay in the Plan. 

Crosatto Decl., Document No. 19.2, ¶ 12.
Page 19.2.1

Document No. 19.2

DECLARATION OF DONALD CROSATTO

I, Donald Crosatto, declare as follows:

1. I am the Assistant Directing Business Representative for District 190 of the International 

Association of Machinists and Aerospace Workers, AFL-CIO (“Union”), and a Trustee 

of the Automotive Industries Pension Plan (the “Plan”). District 190 represents members 

working for automotive industry businesses, including automotive dealerships, auto and 

truck repair shops, auto body shops, and auto parts distributors and retail shops. District 

190 also represents members working for machine and manufacturing businesses, 

including manufacturing plants, canneries, bakeries, and waterfront repair and 

maintenance. I have 27 years of experience representing workers in the automotive and 

machine/manufacturing industries.

2. The decline over the last 10 years in the domestic automotive industry coupled with the 

economic recessions over the last 15 years have had a great impact on the businesses, 

especially automotive related businesses, in the Union’s jurisdiction. Specifically, these 

occurrences led to the closure of many of the local auto dealerships and automotive parts 

retail shops in the San Francisco Bay Area, which employed a significant portion of our 

members.

3. The following provides examples of the decline in the automotive industry businesses in 

the Union’s jurisdiction and contributing employers to the Plan: 

a. In 1955, there were approximately 149 employers (exclusively automotive 

industry related businesses) signatory to the first collective bargaining agreement 

that required participation in the Plan. 145 of these original signatory employers 

are now defunct. 

b. In 2000, there were approximately 16 Ford and 10 Chrysler dealerships in the 

East Bay contributing to the Plan. In 2015, only 3 of those 26 East Bay 

dealerships remain as contributing employers to the Plan. 

c. The Union used to represent a large automotive parts retail industry. As of today, 

all but one of those employers have gone out of business. For example, at one 

time, Grand Auto Supply employed approximately 600 Plan participants. Now, 

the company no longer exists. 

4. Between the implementation of the 2008 Rehabilitation Plan and its update in 2012, the 

local auto dealer and automotive parts retail industries continued to decline. 

5. The 2008 Rehabilitation Plan initially imposed a 12.5% cumulative supplemental 

employer contribution on employers which was set to take effect in 2013.

6. Some of our employers were financially healthy and could afford such an increase. 

However, many of the smaller employers informed me during collective bargaining that 

they would be unable to pay this supplemental employer contribution and threatened that 

they would have no choice but to go out of business or file for bankruptcy. 
Page 19.2.2

7. In addition to potentially losing many small employers, the Trustees were convinced that 

the 12.5% cumulative supplemental employer contribution would cause the three largest 

contributing employers to leave the Plan and, if those employers left, it could lead to a 

mass withdrawal. 

8. By 2012, the Plan’s financial situation had deteriorated further such that a 12.5% 

cumulative supplemental contribution on employers would not be sufficient to enable the 

Plan to emerge from Critical Status. Instead, a 35.8% cumulative supplemental 

contribution on employers would be required to emerge from Critical Status by the end of 

2023. For example, the average contribution would have to grow from $394 to $3,356 to 

emerge from critical status by the end of 2023. 

9. In the updated 2012 Rehabilitation Plan, the Trustees determined that the 35.8% 

cumulative supplemental contribution would be unreasonable and only further jeopardize 

the Plan’s funding status. Employers, unable to afford these increases, would leave the 

Plan resulting in a mass withdrawal. Moreover, without such an increase, emergence 

from Critical Status was not possible and the Rehabilitation Plan could not be expected to 

do any more than forestall the insolvency of the Plan. 

10. Based on information obtained in collective bargaining, the Trustees believed that a 

maximum cumulative supplemental employer contribution rate of 5.0% would allow the 

Plan to retain employers and discourage withdrawals thereby allowing the Plan to 

maintain or possibly improve its funding status and forestall insolvency as long as 

possible. Accordingly, the Trustees adopted the cumulative supplemental employer 

contribution rate of 5.0% as part of the 2012 Rehabilitation Plan update. 

11. The Plan’s underfunded status and the Rehabilitation Plan surcharges have made it very 

difficult to bring new employers into the Plan. Since the Plan first had withdrawal 

liability in 2004, only a handful of new employers have entered into the Plan and no new 

employers have entered the Plan since the Rehabilitation Plan in 2008. While the Union 

has successfully organized many new workplaces, it has stopped proposing that 

employers enter into the Automotive Industries Pension Plan and instead proposes other 

alternatives. 

12. In a typical year, I am involved in the collective bargaining agreement (“CBA”) 

negotiations with 10-15 employers. District Lodge 190 does not have a master collective

bargaining agreement but rather over 160 individually negotiated agreements. Since the 

Rehabilitation Plan, employers have not been agreeable to increases in the pension 

contribution rate. The issue of pension underfunding comes up in virtually all 

negotiations. Employers, including several of the ten largest employers, have openly 

contemplated withdrawing from the Plan. The Union has had to expend considerable 

effort in encouraging employers to stay in the Plan. The possibility of the Plan avoiding 

insolvency with a benefit suspension has had a calming effect on employers’ desire to 

leave the Plan.
13. Active participants in the Plan have also been seeking alternatives to remaining in the 

Plan. At Union contract proposal meetings, members are proposing that any new 

retirement money is bargained into either a 401(k) Plan or into the lAM National Pension 

Fund ("lAM"). lAM is increasingly attractive to participants, as it is fully funded and its 

accrual rate is approximately 2%, twice the rate that active Automotive Industries Plan 

participants receive. 

14. Once informed about MPRA, active participants tend to support the Plan making an 

application because they believe that the Plan's projected insolvency will mean they will 

receive little, if any, of their pension when they retire. 

15. In the Plan's geographic area, industry competition has impeded wage growth although 

overall compensation costs for union members are higher due to better benefits. 

I declare under penalties of perjury that, to the best of my knowledge and belief, the 

foregoing is true and correct. 

Executed on September 22, 2016 at Oakland, California. 

Page 19.2.3 Redacted by the U.S. Department of the Treasury