Carpenters Pension Trust Fund – Detroit and Vicinity

MPRA Narrative Statement

• INTRODUCTION

The Carpenters Pension Trust Fund – Detroit and Vicinity (“Pension Fund” or “Plan”) was 

established on May 1, 1957, when the predecessor of the current union sponsor – the Michigan 

Regional Council of Carpenters -- negotiated a collective bargaining agreement with several

employer associations representing carpentry industry employers. As was typical of pension plans 

then, both contribution and benefit levels were modest. As the industry expanded the Pension Plan 

also expanded to cover segments of related industries, such as millwrighting, floor-laying and 

others. New employer associations joined the Fund and were added as settlors. 

The Union also underwent changes as time passed and the footprint of the carpentry industry 

grew. The Union began as the Carpenters Detroit Council, which then grew to a statewide council 

of all Michigan carpenter and millwright locals. The Pension Fund however retained its more 

limited geographic jurisdiction, primarily covering the Southeast Michigan (Detroit) area with the 

rest of the State of Michigan being covered by the Michigan Carpenters Pension Fund, which is 

separate and unrelated to the Pension Fund.

The Pension Fund filed an application for permission to suspend benefits under the 

Multiemployer Pension Reform Act of 2014 (“MPRA”) on September 27, 2019. The application 

was withdrawn on April 23, 2020, after consultation with the Internal Revenue Service division of 

the U.S Department of Treasury (IRS), the Pension Benefit Guaranty Corporation (PBGC) and the 

US Department of Labor, Employee Benefits Services Administration (DOL), collectively the 

“Agencies”. This application is the successor to that prior application and is based on an additional 

year of plan operation (which resulted in the continued degradation of the Pension Fund’s financial 

strength), updated actuarial assumptions, and responses to specific comments from the agencies. 

In response to Agencies’ input, the application specifically addresses the impact and anticipated 

future impact of the COVID-19 pandemic, which has been thoroughly incorporated into the 

proposed suspension methodology. 

• BACKGROUND

As recently as 2001, the Pension Fund was considered 100% funded, with $1.1. Billion in 

assets and over 15 million yearly employer contribution work-hours. Unfortunately, though, 2001

was the highwater mark of the Pension Fund’s financial position. The bursting of the “tech

bubble”, the September 11, 2001, terrorist attack and the recession that followed had a profound 

effect on the economy of Southeast Michigan and, therefore, on the Pension Fund. Southeast 

Michigan’s economy is still substantially tied to the automobile industry and the Detroit 

metropolitan area was even more auto industry dependent. Adding to the impact of a cyclical

recession, the financial market meltdown in 2008 inflicted great and lasting damage on the Pension 

Fund. The downturn was especially difficult for the auto industry which suffered from the absence 

of available consumer credit. Two out of three major US automakers eventually were “bailed out”

by the federal government through a subsidized bankruptcy discharge. While the Pension Fund 

itself is not tied directly to the auto industry (no automobile manufacturers are signatory 

contributors to the Pension Fund), much of the construction work that provides the Fund’s

contribution base units (workhours) is intertwined with that industry. 

CPTF000289 CPTF - 
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To deal with these negative economic forces, the Pension Fund’s Trustees took several

remedial measures, even before the Pension Protection Act of 2006 (PPA) imposed remediation 

requirements on multiemployer pension plans throughout the country. These measures are 

described in the timeline that follows.

The adoption of PPA, just prior to the 2008 financial market meltdown, and the subsequent 

bankruptcy of a large part of the automobile industry, is the proverbial “straw” that “broke” the 

Pension Fund’s “back”. The PPA required ever higher (uncredited) contribution levels at the same 

time that the economy in Southeast Michigan went into a tailspin, dragging down not only the 

automobile industry, but the construction industry as well. Work hours went from their 2001 high 

of 15 million to a low of approximately 6 million in 2011. Even the adoption of WRERA and its 

ameliorative provisions, such as amortization of investment losses, did not materially help the

Pension Fund regain its financial health. Moreover, the ever increasing mandatory PPA 

contributions made it that much harder for the Pension Fund to recover because it was essentially 

“taxing itself out of existence” by increasing the required hourly pension contribution ever higher

to meet PPA’s stringent funding requirements. This process placed signatory employers at a 

bidding disadvantage against non-contributing contractors, in the very competitive construction

industry. It drove work hours even lower, decreasing overall Pension Fund employer contributions 

rather than increasing them. Compounding this negative trend, increasing employer withdrawal 

liability levels further discouraged new employers from signing on to union contracts that required 

defined benefit pension contributions. And, ever-increasing uncredited pension contribution levels 

discouraged new and younger workers from joining the unionized trades which support the 

Pension Fund. The impact on the Pension Fund was catastrophic as can readily be seen in the

following graphs.

• HISTORICAL PLAN INFORMATION

The following year-by-year summary of critical Plan information illustrates the Pension Fund’s

decline from plan year 2001, the point that the Pension Fund was considered fully funded, to its 

current 2019 plan year (as of April 30, 2020) condition. The graphs below highlight the 

workhours, investment returns and funded percentage of the Pension Fund over time. More 

detailed information on these factors is contained in the actuarial and audit reports supporting this 

application. 

Plan Year Commencing: May 1, 2001

• Assets – Market Value: $1,087,385,292

• Assets – Actuarial Value: $1,179,424,453

• Net Investment Return on Market Value: -2.78%

• Net Investment Return on Actuarial Value: 9.02%

• Current Liabilities: $1,436,273,063 (calculated under the Reform Pension Act of 1994)

• UVB: ($149,639,854)

• Actives: 11,887

• Retirees/Beneficiaries: 5,408

• Work Hours: 15,155,386

• Contribution Rate (Commercial Carpenters) $3.14

• Funded Percentage: 100%

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Plan Year Commencing: May 1, 2002

• Assets – Market Value: $1,043,761,840

• Assets – Actuarial Value: $1,240,316,809

• Net Investment Return on Market Value: -4.38%

• Net Investment Return on Actuarial Value: 4.97%

• Current Liabilities: $1,886,069,584 (calculated under the Reform Pension Act of 1994)

• UVB: ($92,033,593)

• Actives: 12,148 

• Retirees/Beneficiaries: 5,727

• Work Hours: 14,278,260

• Contribution Rate (Commercial Carpenters) $3.36

• Funded Percentage: 83%

Plan Year Commencing: May 1, 2003

• Assets – Market Value: $913,457,567

• Assets – Actuarial Value: $1,096,149,080

• Net Investment Return on Market Value: -8.53%

• Net Investment Return on Actuarial Value: -8.29%

• Current Liabilities: $2,148,503,170 (calculated under the Reform Pension Act of 1994)

• UVB: $212,835,632

• Actives: 11,298

• Retirees/Beneficiaries: 5,771

• Work Hours: 13,303,956

• Contribution Rate (Commercial Carpenters) $3.36

• Funded Percentage: 66%

Plan Year Commencing: May 1, 2004

• Assets – Market Value: $989,267,988

• Assets – Actuarial Value: $1,135,029,517

• Net Investment Return on Market Value: 14.03%

• Net Investment Return on Actuarial Value: 8.19%

• Current Liabilities: $2,047,258,931

• UVB: $276,061,203

• Actives: 10,439 

• Retirees/Beneficiaries: 5,904

• Work Hours: 12,301,023

• Contribution Rate (Commercial Carpenters) $3.45

• Funded Percentage: 67%

Plan Year Commencing: May 1, 2005

• Assets – Market Value: $991,130,778

• Assets – Actuarial Value: $1,078,562,590

• Net Investment Return on Market Value: 5.93%

• Net Investment Return on Actuarial Value: -0.12%

• Current Liabilities: $2,096,792,198

• UVB: $284,426,228

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• Actives: 9,944

• Retirees/Beneficiaries: 6,077

• Work Hours: 11,988,262

• Contribution Rate (Commercial Carpenters) $3.55

• Funded Percentage: 63%

Plan Year Commencing: May 1, 2006

• Assets – Market Value: $1,059,917,320

• Assets – Actuarial Value: $1,050,435,719

• Net Investment Return on Market Value: 13.64%

• Net Investment Return on Actuarial Value: 3.25%

• Current Liabilities: $2,297,212,922

• UVB: $393,523,664

• Actives: 9,096

• Retirees/Beneficiaries: 6,223

• Work Hours: 11,270,968

• Contribution Rate (Commercial Carpenters) $4.54

• Funded Percentage: 63%

Plan Year Commencing: May 1, 2007

• Assets – Market Value: $1,084,686,212

• Assets – Actuarial Value: $1,050,682,726

• Net Investment Return on Market Value: 9.04%

• Net Investment Return on Actuarial Value: 6.72%

• Current Liabilities: $2,491,704,430

• UVB: $561,058,731

• Actives: 7,993 

• Retirees/Beneficiaries: 6,324

• Work Hours: 10,020,514

• Contribution Rate (Commercial Carpenters) $6.30

• Funded Percentage: 57%

Plan Year Commencing: May 1, 2008

• Assets – Market Value: $1,035,625,905

• Assets – Actuarial Value: $1,080,411,426

• Net Investment Return on Market Value: 0.56%

• Net Investment Return on Actuarial Value: 8.28%

• Current Liabilities: $3,226,868,064

• UVB: $614,556,401

• Actives: 7,842 

• Retirees/Beneficiaries: 6,459

• Work Hours: 10,664,533

• Contribution Rate (Commercial Carpenters) $8.05

• Funded Percentage: 58%

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Plan Year Commencing: May 1, 2009

• Assets – Market Value: $771,040,307

• Assets – Actuarial Value: $925,248,368

• Net Investment Return on Market Value: -20.15%

• Net Investment Return on Actuarial Value: -8.87%

• Current Liabilities: $3,469,148,181

• UVB: $852,245,165

• Actives: 6,924

• Retirees/Beneficiaries: 6,713

• Work Hours: 8,454,305

• Contribution Rate (Commercial Carpenters) $9.80

• Funded Percentage: 46%

Plan Year Commencing: May 1, 2010

• Assets – Market Value: $791,895,029

• Assets – Actuarial Value: $1,016,672,140

• Net Investment Return on Market Value: 13.43%

• Net Investment Return on Actuarial Value: 9.53%

• Current Liabilities: $3,024,986,192

• UVB: $767,331,195

• Actives: 5,465

• Retirees/Beneficiaries: 6,888

• Work Hours: 5,796,364

• Contribution Rate (Commercial Carpenters) $11.35

• Funded Percentage: 47%

Plan Year Commencing: May 1, 2011

• Assets – Market Value: $806,189,577

• Assets – Actuarial Value: $967,427,492

• Net Investment Return on Market Value: 10.62%

• Net Investment Return on Actuarial Value: 1.73%

• Current Liabilities: $3,194,179,131

• UVB: $900,911,120

• Actives: 5,414

• Retirees/Beneficiaries: 7,083

• Work Hours: 6,267,773

• Contribution Rate (Commercial Carpenters) $12.86

• Funded Percentage: 48%

Plan Year Commencing: May 1, 2012

• Assets – Market Value: $724,987,065

• Assets – Actuarial Value: $869,984,478

• Net Investment Return on Market Value: -3.63%

• Net Investment Return on Actuarial Value: -4.73%

• Current Liabilities: $3,428,538,836

• UVB: $1,062,971,006

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• Actives: 5,531

• Retirees/Beneficiaries: 7,263

• Work Hours: 6,882,663

• Contribution Rate (Commercial Carpenters) $14.36

• Funded Percentage: 44%

Plan Year Commencing: May 1, 2013

• Assets – Market Value: $718,005,867

• Assets – Actuarial Value: $861,607,040

• Net Investment Return on Market Value: 6.31%

• Net Investment Return on Actuarial Value: 5.06%

• Current Liabilities: $3,402,659,043

• UVB: $1,220,310,639

• Actives: 5,213

• Retirees/Beneficiaries: 7,339

• Work Hours: 6,452,511

• Contribution Rate (Commercial Carpenters) $15.91

• Funded Percentage: 42%

Plan Year Commencing: May 1, 2014

• Assets – Market Value: $747,281,896

• Assets – Actuarial Value: $883,023,972

• Net Investment Return on Market Value: 10.51%

• Net Investment Return on Actuarial Value: 7.78%

• Current Liabilities: $3,285,797,602

• UVB: $1,000,058,333

• Actives: 4,986

• Retirees/Beneficiaries: 7,363

• Work Hours: 6,201,665

• Contribution Rate (Commercial Carpenters) $15.91

• Funded Percentage: 43.9%

Plan Year Commencing: May 1, 2015

• Assets – Market Value: $746,438,678

• Assets – Actuarial Value: $859,593,662

• Net Investment Return on Market Value: 4.42%

• Net Investment Return on Actuarial Value: 1.12%

• Current Liabilities: $3,529,225,638

• UVB: $1,127,246,183

• Actives: 5,054

• Retirees/Beneficiaries: 7,276

• Work Hours: 6,771,552

• Contribution Rate (Commercial Carpenters) $15.91

• Funded Percentage: 42.5%

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Plan Year Commencing: May 1, 2016

• Assets – Market Value: $712,660,227

• Assets – Actuarial Value: $821,813,613

• Net Investment Return on Market Value: -0.22%

• Net Investment Return on Actuarial Value: -0.66%

• Current Liabilities: $3,669,138,929

• UVB: $1,267,451,875

• Actives: 5,246

• Retirees/Beneficiaries: 7,290

• Work Hours: 7,306,229

• Contribution Rate (Commercial Carpenters) $15.91

• Funded Percentage: 38.9%

Plan Year Commencing: May 1, 2017

• Assets – Market Value: $734,239,795

• Assets – Actuarial Value: $781,238,944

• Net Investment Return on Market Value: 11.13%

• Net Investment Return on Actuarial Value: 1.78%

• Current Liabilities: $3,775,320,326

• UVB: $1,404,147,804

• Actives: 5,208

• Retirees/Beneficiaries: 7,314

• Work Hours: 7,266,322

• Contribution Rate (Commercial Carpenters) $15.91

• Funded Percentage: 36.4%

Plan Year Commencing: May 1, 2018

• Assets – Market Value: $761,729,009

• Assets – Actuarial Value: $771,736,789

• Net Investment Return on Market Value: 7.87%

• Net Investment Return on Actuarial Value: 2.56%

• Current Liabilities: $3,977,510,040

• UVB: $1,433,305,500

• Actives: 5,803

• Retirees/Beneficiaries: 7,395

• Work Hours: 8,184,596

• Contribution Rate (Commercial Carpenters) $15.91

• Funded Percentage: 34.5%

Plan Year Commencing: May 1, 2019

• Assets – Market Value: $772,279,905

• Assets – Actuarial Value: $777,050,724

• Net Investment Return on Market Value: 6.65%

• Net Investment Return on Actuarial Value: 5.87%

• Current Liabilities: $3,922,320,908

• UVB: $1,463,932,978

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result, each $100.00 in new pension contributions generated $3.00 in new monthly benefits for 

participants, instead of $4.30 under the prior accrual rate. The benefit multiplier was further 

reduced in 2007 when it was set at 1% of contributions, a reduction of about 75% from the benefit 

rate that was in effect prior to 2004. Again, these corrective measures were adopted even before 

the PPA went into effect for the Pension Fund.

Starting in June 1, 2006, not all employer contributions to the Pension Fund are deemed 

“credited” and used in the Pension Plan’s benefit formula. In other words, the 1% benefit 

multiplier applied only to the “credited” portion of the pension contribution while the “uncredited” 

portion was used to reduce the plan’s unfunded legacy obligations. Initially, the contribution 

“discount” used to determine the credited/uncredited portion of contributions was set at 22% for 

most participant groups. For the most recent plan year, the “discount” rate is set at about 61% for 

most participant groups. As a result, only 39% of the contribution is now considered “credited” 

and used in the benefit formula. Participants accrue a future benefit at 1% of that 39% of their

total pension contribution rate. To illustrate using the same $100.00 in contributions: $39.00 of 

that contribution is considered “credited” and applying a 1% multiplier, it results in a $0.39 new 

monthly benefit accrual. Before 2004, that same contribution amount would have generated a 

$4.30 monthly benefit increase and would have generated a $3.00 monthly benefit increase 

between 2004 and 2007, based on a 4.3% and 3.0% benefit multiplier respectively.

Additional benefit reductions were adopted in 2010 in an effort to meet PPA requirements, 

such as eliminating so-called “index 80” retirements (unreduced early retirement benefit, based on 

a combination of age and service), replacing them with benefits that imposed new and more 

stringent requirements, such as a minimum retirement age of 55 and index 85 (instead of 80), for 

unreduced early retirement benefits.

The Pension Plan imposed further benefit cuts as part of its 2013 “PPA all reasonable 

measures plan”, including increasing the minimum age for unreduced early retirement to age 62, 

imposing higher early retirement reduction factors, imposing disability benefit cuts and eligibility 

requirements, and reducing pre-retirement death benefits.

Meanwhile, covered employers’ Pension Fund contribution rate rose dramatically,

including both pre-PPA increases and post-PPA required increases. The current Pension Fund 

contribution rate for commercial carpenters is $15.91 per hour – increased from $3.13 per hour in 

2000 – about a fivefold increase in less than 15 years. One key factor considered by the Trustees 

in adopting the Pension Fund’s “all reasonable measures” plan was that the combination of a high 

contribution rate with benefit cuts makes it very difficult to recruit new participants or new 

contributing employers. Essentially, the Trustees concluded that Pension Fund will price itself out 

of the market if it continues on that path. The all reasonable measures plan adopted in 2013 was 

a crucial step towards avoiding insolvency, but it has not proven to be enough by itself. A

suspension of benefits under MPRA is, under the current facts and circumstances, the only option 

left the Trustees in their determination to save the Plan.

• FUTURE OUTLOOK

At the end of the 2017 Plan Year (April 30, 2018), the actuary determined that the Pension 

Fund was in a critical and declining status. The Trustees evaluated the root causes of the Pension 

Fund’s condition as well as key indicators that are critical to its future, such as the near-and-longCPTF000299 CPTF - 
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term prospects for the construction industry in Southeast Michigan and the broader economy, 

investment market performance, unionized workforce issues and other relevant factors, in deciding 

to apply to suspend benefits under MPRA. To add objectivity to the prediction of future economic 

activity, the Pension Fund retained Dr. Malcom Cohen, PhD., a University of Michigan economist,

to further analyze economic factors that will likely impact its future, especially the projected 

workhours. A follow up survey of the associations that represent contributing employers was 

conducted after the initial waive of impacts from the COVID-19 pandemic were experienced to 

better gauge the pandemic’s impact on the Pension Fund’s contribution base units. The Trustees 

continue to monitor the impact of the pandemic on the workforce and, as part of the process, have 

determined that there will be long-term consequences associated with the pandemic and its 

economic dislocations, whether or not there are subsequent outbreaks of COVID-19.

The Trustees observed while preparing the initial suspension application that Michigan 

unionized construction had been experiencing a short-term upward trend in workhours before the 

pandemic. The trend, viewed from a post-COVID-19 perspective, is seen as unlikely to continue 

(the Trustees viewed it as a non-permanent phenomenon even before the pandemic). Its 

impermanence is in part due to the fact that the construction industry, by its very nature, can best 

be described as “one-and-done” activity.

There is a limited number of “significant projects” - projects generating substantial work 

hours - that can be forecast to exist in a given geographic area. Once those projects are completed 

(the Little Caesar’s Arena sports and entertainment complex in downtown Detroit being an obvious 

example) related construction work ends other than any subsequent maintenance work (which 

requires far fewer workhours). The proposed Gordie Howe Bridge, an international bridge 

crossing the Detroit river to Windsor, Ontario, Canada, a proposed downtown high rise, and a new 

(Wayne) county jail are “significant projects” that offer a likelihood of generating significant 

future workhours. Beyond these projects, there are no other currently envisioned large-scale

developments that can extend the recent building boom past the short term. Therefore, based on 

the best information available to them, the Trustees anticipate that workhours will decline. (The 

Trustees have worked with their professionals and, as noted, have canvassed the employer 

associations (who necessarily have a significant economic stake in preparing for future work needs 

and have no impetus at all to over or under estimate them) to arrive at reasonable assumptions for 

future work hours.)

• PROJECTED FUTURE CONTRIBUTION BASE UNITS (CBU)

Beyond the pandemic’s impact on the economy, recent changes in Michigan’s laws have 

added additional headwinds to unions and their signatory employers on which the Pension Fund 

depends. Michigan has adopted “right-to-work” laws and eliminated prevailing wage laws on all 

State jobs. The impact of these and similar anti-union laws is to discourage both union 

membership by employees, and to put signatory contractors at an even greater disadvantage in the 

marketplace because they now can be consistently underbid by non-union companies. The rightto-work laws essentially encourage non-union bargaining units, which further depress the 

sponsoring union’s ability to organize new contractors that would otherwise pay into the Pension 

Fund. The elimination of prevailing wage laws permits non-union contractors to gain market share

advantages over unionized contractors when bidding for work in the State, which once had to be 

performed paying a union scale prevailing wage, further depressing the Pension Fund’s workhours 

outlook. These laws further support the downward trend in unionized carpentry trade workhours

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in Southeast Michigan, that is reflected in the Pension Fund actuary’s projection of slightly fewer

workhours on a long-term basis (6.9 million) than that assumed in the Pension Fund’s prior 

application (7.0 million). 

In preparing this application and its underlying assumptions, the Pension Fund has 

carefully followed the Treasury’s informal suggestion that the plan actuary should develop 

assumptions for future contribution base units based not only on the input from the plan sponsor,

but that the plan actuary should also independently assess the input provided by the plan sponsor 

and develop a basis that is therefore “reasonable”. Staying faithful to that guidance, the Pension 

Fund has established both short-term and long-term CBU assumptions that are reasonable across 

the extended period and which, to the extent possible, were premised on objective evidence, 

verified in a number of ways.

1

First, the Pension Fund gathered extensive information from its Trustees, who represent

the industries whose employers contribute to the Pension Fund. It is understood that those 

employers as a matter of course engage in forward-looking business planning and that, as

unionized companies, fringe benefit contribution obligations are a significant element of their cost 

structure. The Pension Fund made a reasonable judgment that the employers’ forecasts of future

business opportunities and attendant costs (driven by workhours) would be as precise as business

experience and business necessity could make them. 

Second, the Fund’s actuary used its long experience advising the Pension Fund and other 

pension funds covering other local and regional construction trades to develop yearly workhour 

assumptions to satisfy the Fund’s obligations under PPA. These assumptions and the information 

on which they are based was further validated thorough consultation with the Fund Trustees, 

outside sources and historical records. 

Third, the Pension Fund retained a University of Michigan economics professor, whose 

expertise is focused on economic activity in southeast Michigan. Dr. Malcom S. Cohen’s findings, 

based on his independent research, support the CBU assumptions used by the Pension Fund. Even 

though it was conducted before the pandemic, Dr. Cohen projects that southeast Michigan will

experience periodic recessions over his twenty-year period of review. As he explained:

“To estimate the impact of future declines, I have included a projection that 

assumes there will be two declines over the next 20 years and that each will average 

30%. I assume that employment will decline 15% during the first year, and bottom 

at 30% in the second year, then return to the 4.2% growth rate experienced by 

Carpenter hours from 2010 to 2018”. 

So, the impact of disruptive events, like the pandemic, is already factored into Dr. Cohen’s 

research and projections, although the severity and length of any economic downturn due to the 

pandemic cannot yet fully known. Nevertheless, the CBU assumptions used in this application

have considered the impact of the pandemic and similar disruptive events on both short-term and 

long-term CBU projections, as reflected in Dr. Cohen’s study and the Fund’s survey. 

1 See, Exhibit A, Statement Regarding CBU Assumptions, attached.

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Fourth, the pre-pandemic approach to the selection of the Pension Fund’s CBU assumption 

was further validated by a recent survey of the entire industry – which was undertaken to better 

gauge the pandemic’s impact on the CBU assumptions. The Pension Fund conducted a recent

survey of all eleven contractor Associations which represent about 500 employers that make 

contributions to the Pension Fund.2 The Associations’ projections cover commercial and 

residential carpentry, millwriting, floorlaying, display industry, roadbuilders and related crafts. 

Input was also received from the Michigan Regional Council of Carpenters (MRCC) which 

provided its own projections of expected manpower demands and workhours, for both the short 

and long terms. The MRCC’s response also addresses current (pre-pandemic) manpower 

shortages and its long-term plans to deal with same. To meet those demands, three new training 

facilities have been constructed – two completed and the third under construction. 

While this unprecedented pandemic creates many uncertainties for the construction 

industry, its impact on workhours is projected not to be completely negative, when other relevant 

factors are taken into account. One of these factors is the MRCC’s unique role in providing

Infectious Control Risk Assessment (“ICRA”) training, which qualifies members to perform 

construction work in and for the medical facilities, where disease control is a critical factor. The 

ICRA training, developed by the MRCC’s parent body – The United Brotherhood of Carpenters 

and Joiners of America, has been widely accepted not only in Michigan, but throughout the 

Country as preparing workers to function effectively in performing construction work for and in 

medical facilities. IRCA training has been so effective that members of many other building trades 

unions, such as roofers, painters, sprinkler fitters, etc., receive ICRA training from the MRCC. 

The Center for Medicare and Medicaid Services (CMS), which is a part of the U.S. Department of 

Health and Human Services, already requires accredited healthcare facilities (including over 180 

hospitals in Michigan) to use ICRA (or equivalent) trained workers for future construction work. 

Likewise, any pandemic driven stimulus legislation is likely to rely heavily on infrastructure work, 

which bodes well for pension workhours that historically flow from such work.

Survey responses from the MRCC and the eleven Associations are consistent with the 

Pension Fund’s workhour projections. Generally, they anticipate a short-term uptick in covered 

work through 2023, which is expected to flatten out thereafter. Survey responses also recognized 

that manpower shortages existed prior to the pandemic and may persist in the short term. 

After distilling all of this workhour information into CBU projections, the Pension Fund 

projects a slight increase in workhours is expected in the short term, flattening out after that. 

Specifically, 7.0 million workhours are projected in each of the next two plan years and 6.9 million

man hours are projected for each subsequent year – the same workhours that are projected for the 

current (pandemic) plan year. As noted, these CBU assumptions were established and supported

by the results of an exhaustive four-tiered process: 1) Trustee projections; 2) actuarial validation;

3) Dr. Cohen’s study; and 4) industry survey. 

2 Architectural Contractors Trade Association; Associated General Contractors of America; Construction Association 

of Michigan; Carpenter Contractors Association; Washtenaw Contractors Association; Michigan Carpentry 

Contractors Association; Michigan Conveyor Manufactures Association; Michigan Exhibit Producers Association; 

Michigan Infrastructure and Transportation Association; Poured Concrete Wall Association; Southeast Michigan 

Carpentry Contractors Association. These Associations represent over 500 separate contractors.

CPTF000302 CPTF - 
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• PROJECTED INVESTMENT RETURN ASSUMPTIONS

The Pension Fund’s investment returns also play a critical role in its future, and indeed, in this 

application. The Pension Fund’s projections for future investment earnings rely on the Agencies’

sanctioned asset class return assumptions – set forth in the most recent Horizon study (published 

in July 2020) - for projecting Fund investment returns. The investment strategy developed by the 

Pension Fund, in consultation with its professionals, is set forth in its Investment Policy Statement, 

which was included with the original application and has been modified, addressing the Agencies’ 

comments, for this filing. It now expressly addresses the impact of liquidity needs on longer term

returns, as the Pension Fund’s funded ratio decreases over time. As noted by the Agencies, a

significant portion of the Pension Fund’s assets are invested in a real estate portfolio, comprised 

of GSA holdings. These assets were managed for the Pension Fund by a Qualified Professional 

Asset Manager (QPAM), before their transfer into a comingled fund on July 1, 2020. Improving 

the real estate portfolio’s liquidity and diversification, was accomplished by the transfer. 

Individual real estate holdings were relatively illiquid (i.e., realizing cash proceeds required the 

Pension Fund to market the property, find a buyer at an appropriate purchase price and sell the 

property, a process that would take at least several months)3. The transfer of the properties to a 

comingled investment fund provided the Pension Fund with both better diversification and 

liquidity – allowing for quarterly withdrawals. One element of the Pension Fund’s thesis for 

incorporating real estate into its investment portfolio is that it acts as a counter measure to 

fluctuations in the equities market and offset low interest rates and returns of debt instruments, like 

bonds. The structure of the portfolio presents an effective hedge against financial risks like the 

COVID-19 pandemic, while the comingled nature of the Fund’s GSA holdings now offers 

substantially more liquidity, without sacrificing returns. 

And, consistent with the Agencies’ comments, the Pension Fund’s Investment Policy 

Statement now incorporates specific trigger points which require the Pension Fund to sell illiquid 

assets as necessary to meet cashflow requirements caused by benefit outflows or other future 

events. Illiquid asset sale trigger points are determined based on cashflow-to-asset ratios, also 

consistent with the Agencies’ comments. And, the Pension Fund’s projected liquidity needs are 

reflected in the application’s investment return assumptions for those future periods. The 

investment return assumptions and their impact on the Penson Fund are discussed in more detail 

elsewhere in this application.

• THE MPRA FILING

This application filing addresses issues and comments raised by the Agencies during their 

review of the original filing. The suspension formula adopted by the Pension Fund in the filing is 

designed to achieve MPRA’s statutory goals, while applying the necessary suspensions in an 

equitable manner across the entire Pension Plan participant population. That formula was 

3 GSA real estate holdings were subject to mortgage debt, which further complicated selling individual properties 

(potential requirements of lender consent, restrictions on the use of funds raised by the sale and penalties 

associated with removal of collateral from encumbrance or pre-payment). The transfer of the GSA properties to a 

commingled fund eliminates this impediment to liquidating Pension Fund GSA real estate holding as needed to 

raise cash to pay benefits. The Pension Fund anticipates taking similar actions with respect to its other real estate 

holdings to improve portfolio liquidity where prudent and feasible.

CPTF000303 CPTF - 
16

developed after extensive study and consultation with the Pension Fund’s professional advisors, 

evaluation of the future of unionized carpentry construction work and other relevant factors 

required by the statute. The Trustees of the Pension Fund have determined that the proposed 

suspension formula does not unnecessarily affect those participants, and accomplishes the stated 

statutory goal of preventing the Pension Fund’s insolvency. Importantly, the suspension formula 

falls equally across all participant groups – active, vested deferred, retired participants and

surviving spouses. The formula acknowledges the significant prior sacrifices of more recent 

participants by providing that post-2007 benefit accruals will not be reduced further – below that 

PPA minimum. The fairness of this exception is supported by the obvious fact that participants 

subject to the 1% benefit multiplier for the past 13 years have already contributed heavily to the

payment of the Pension Fund’s underfunded accrued legacy costs. That contribution was made in 

two ways – by sacrificing benefit accruals based on a substantial portion of their pension 

contribution (initially 22%, now 61% of the $15.91 hourly pension contribution rate) and by 

having their benefit multiplier set so low on the credited component of the contribution so that a 

substantial portion of that amount is also earmarked towards the underfunded legacy costs. In 

short, these “one percenters” have carried the load of Pension Fund’s efforts to improve its 

financial position over the last 13 years and have already paid a heavy price to improve the Pension 

Fund’s funded level. 

The Pension Fund’s initial MPRA application imposed no benefit cuts on the “one percenters”, 

and the Agencies raised no objection to this treatment even though they raised concerns about 

other aspects of the suspension formula proposed in the initial application (e.g., the vested deferred

participants’ general suspension rate). 

• CONCLUSION

The Pension Fund is a “mature” fund and the dwindling ratio between active participants and 

retirees is likely to continue to decrease. Sufficient accrued asset reserves are not available to pay 

these benefits. The Pension Fund has only a 34.5% current funding level and is projected to 

become insolvent in 2035 unless the proposed MPRA-permitted benefit adjustments are 

implemented. The elimination of adjustable benefits permitted under PPA, because of their limited 

scope, could not correct the Pension Fund’s funding insufficiencies. While a few additional 

“adjustable benefits” could have been reduced or eliminated under the PPA, the Pension Fund was 

understandably concerned about the clear negative impact that further reductions have on 

recruiting and, by extension, on the workhours – a concern made more acute by the ever-increasing 

contribution rate. Directing contractually-negotiated compensation increases to the Pension Fund 

as un-credited contributions and at the same time decreasing (or cutting) Pension Fund benefits, 

as was required by the PPA has an insidious impact on recruiting new and younger unionized 

carpentry industry participants (who, in turn become Pension Fund participants). Following this 

course, counter-intuitively, eventually causes workhours to suffer which ends up hurting the 

Pension Fund and its future funding position instead of helping it. 

Workhours are a more important funding factor for this Pension Fund in its current condition

than asset investment returns. This is because the Pension Fund’s funding percentage is so low 

that even stellar investment returns on Pension Fund assets (well above the actuarial assumption) 

have continually diminishing impact on its funded percentage. The proposed benefit suspensions

called for in this application is not accompanied by increases to the employer contribution rate 

because, in the judgment of the Trustees and their professional advisors, to do so would hurt, not 

CPTF000304 CPTF - 
17

help, the Pension Fund’s funded percentage. The suspension requested in the application alone 

offers the Pension Fund its only realistic possibility of avoiding insolvency. 

The Pension Fund’s application meets all of the statutory requirements for approval under MPRA. 

Based upon a thorough analysis of all current, historical and future factors affecting the Pension 

Fund, it is the prudent determination of the Trustees that unless benefits are suspended in 

accordance with Internal Revenue Code Section 432(e)(9)(C)(ii), as proposed in the application, 

the Pension Fund will become insolvent, even after all reasonable measures have been taken to 

avoid its insolvency. 

JIT/ldm.W:\FUNDS\mrcc\DB-PENS\MPRA\MPRA Narative Statement.09.26.20.clean draft.docx

CPTF000305 CPTF - 
RESPONSE OF CARPENTERS PENSTION TRUST FUND –

DETROIT & VICINITY

Exhibit A

Actuary’s Statement Regarding CBU Assumptions

During the April 1, 2020 conference call with Treasury, PBGC, and DOL Agency Representatives 

stated that the 7.0 million long-term hours assumption did not account for any future economic

downturns. We disagree with that assessment. We believe that, though the Fund’s ultimate hours 

assumption is flat, such assumption does include appropriate margin to absorb the impact of future 

economic downturns. 

We have chosen to use a flat assumption rather than one that is explicitly cyclic because we feel it 

is not possible to reliably predict the timing or severity of economic cycles. Just as one would 

typically use a flat (or at least piecewise flat) return assumption in a deterministic asset projection 

model, we have set the flat hours assumption as a conservative average that reflects the effects of 

future volatility in economic activity.

In order to provide objective, independent verification of the reasonableness of the long-term hours 

assumption, we direct the reader to the Malcom S. Cohen report.

As part of the initial MPRA filing, the Fund included a report prepared by Malcolm S. Cohen, PhD 

of Employment Research Corporation studying the projected demand for unionized constructionindustry carpenters in Michigan. As part of this analysis, Dr. Cohen provided a schedule of 

projected future work hours (CBUs) for the plan from 2019-2038 (Table 1 of the Cohen report). 

Furthermore, the Cohen report includes an explicit assumption of two economic declines within 

the next 20 years, each one averaging 30%. 

The answer to question 5 in UAS’s January 16 response to Mark Leibowitz’ questions of 

December 20, 2019 discusses the Cohen report. As part of that answer, UAS compares Cohen’s 

hours projections (adjusted to line up with the Fund’s plan year) to the Fund’s assumption. This 

comparison is reproduced below:

Plan Year

Hours Assumption

Cohen1 UAS

PYE 2020 8,617,898 8,200,000 

PYE 2021 8,553,296 8,000,000 

PYE 2022 7,220,315 7,800,000 

PYE 2023 6,285,895 7,000,000 

PYE 2024 6,549,902 7,000,000 

PYE 2025 6,824,998 7,000,000 

PYE 2026 7,111,648 7,000,000 

1 Adjusted to plan year basis.

CPTF (21) Ex A 000001


ADDENDUM to Application Exhibit 22 (Retiree Representative appointment)

As required by the Final Regulation a Retiree Representative must be appointed not later 

than 60 days prior to the filing of an application.

On September 29, 2020, the Michigan Regional Council of Carpenters – Carpenters 

Pension Trust Fund (“CPTF” or “the Fund”) filed its Second Application seeking Treasury’s 

approval of a proposed suspension of benefits. As required under the final regulation, the 

application identifies the Fund’s Retiree Representative, Mr. Charles Tindal, who was appointed 

and took up his office on September 10, 2020.

As part of the Fund’s First Application to Treasury, Mr. David Morris was appointed retiree 

representative effective December 11, 2018. See, Exhibit 18 to the First Application. Mr. Morris’s 

term as retiree representative ended on the day that Mr. Tisdal accepted his appointment, 

September 10, 2020.

CPTF000306A