Western States Office and Professional Employees 

Pension Fund 

Administered by A&I Benefit Plan Administrators, Inc. 

1220 SW Morrison St. Suite 300, Portland OR 97205-2222

(503) 222-7694 (800) 413-4928 Fax (503) 228-0149

http://www.wsp.aibpa.com 

To: Participating Employers and Local Unions 

From: Board of Trustees Labor Trustees Management Trustees

 Judith Zenk, Co-Chair Matt Oglesby, Co-Chair 

 Suzanne Mode Arlene Erickson 

 Mike Richards Michael Parmelee

 Patricia Sanchez Lee Ann Doolittle 

Date: March 26, 2010 

Previously the Board of Trustees of the Western States Office and Professional Employees 

Pension Fund (“Fund”) advised you in writing and in regional meetings of the status of the Fund. 

You were advised that in 2008 the events of the stock market and general economy resulted in the

Fund having investment losses which caused the Fund to be in the “Red Zone.” Therefore the 

Pension Protection Act requires that the Fund adopt a Rehabilitation Plan to get out of the Red 

Zone.1

 The rules for the Rehabilitation Plan are established by the federal government. The 

Rehabilitation Plan is similar to paying a mortgage debt. The Rehabilitation Plan consists of two 

parts. The first part is a reduction of pension benefits. The second part imposes a surcharge on 

contributing employers. The purpose of this notice is to advise you of (a) the current status of the

Fund; (b) the action taken by the trustees; and (c) furnish you with questions and answers which

help explain the current situation. 

There are two important current developments for the Fund. First, the Fund had an investment 

and actuarial gain in calendar year 2009. You were previously told that if the market improves 

that the Rehabilitation Plan would be revised.2

 Accordingly the Rehabilitation Plan is being 

revised to recognize the investment gain. Second, the Board of Trustees adopted at its March

meeting an alternative and Updated Rehabilitation Plan. The original Rehabilitation Plan had a 

13 year “amortization.” The alternative and Updated Rehabilitation Plan has a 25 year 

amortization. Similar to a mortgage, a longer amortization period results in lower monthly

payments. 

The Pension Protection Act provides that the maximum “amortization” period for a Rehabilitation 

Plan is 13 years. An alternative rehabilitation plan may be for a reasonable period of time and

may be longer than 13 years. The statutory language permitting the alternative rehabilitation plan 

 

1

 See Q & A 5. 2

 See Q & A 13.
is vague and incomplete. In fact, the key sentence for the alternative rehabilitation plan is not a

complete sentence and its meaning is only discovered in the Congressional committee reports. 

There are currently no written comments or regulations on an alternative rehabilitation plan. The

Fund’s attorneys contacted the IRS to discuss an alternative rehabilitation plan. An IRS actuary

was very helpful and advised the attorneys that: (1) the IRS has been working for an extended 

period of time to produced written guidelines for an alternative rehabilitation plan but the IRS

does not know when, or if, guidelines will be issued; (2) the Fund is a “classic example” for the

alternative rehabilitation plan; and (3) the Fund had to go through the procedure that it did and 

adopt a rehabilitation plan and now may adopt the alternative and Updated Rehabilitation Plan. 

The Board of Trustees is aware of only two other multiemployer pension plans in the country that 

adopted an alternative rehabilitation. This was discovered by a search of the internet. 

The Board of Trustees adopted an Updated Rehabilitation Plan at their March 19, 2010 meeting. 

The Updated Rehabilitation Plan reflects the following factors: 

• Preliminary investment return for the 2009 calendar year of 16.5%

• Higher incidence of retirements during 2009 than is typical 

• Utilization of an extended Rehabilitation Period (25 years vs.13 years) 

In combination, these factors significantly lowered the level of the Supplemental Contribution 

amounts that are needed to satisfy the requirements of a Rehabilitation Plan. 

For comparison purposes, for an employer that negotiates a collective bargaining agreement

effective January 1, 2010, the following table provides the schedules of the Supplemental 

Contribution Percentages for the Updated Rehabilitation Plan compared to the Original 

Rehabilitation Plan which you were furnished in November, 2009. 

WSOPE Pension Trust Rehabilitation Plan 

Comparison of Supplemental Contribution Percentages 

Year 

Updated 

Rehabilitation Plan

Original

Rehabilitation Plan

2010 15% 26%

2011 30% 52%

2012 45% 78%

2013 60% 104%

2014 75% 130%

2015 90% 156%

2016 105% 182%

2017 120% 208%

2018 135% 234%

2019 150% 260%

2020 165% 286%

2021 180% 312%

2022 195% 338%

2023 210% 364%

2024 220% 364%

2025 & later 220% 364%

 
As you can see, for the Updated Rehabilitation Plan, the better than assumed investment return 

along with the extended plan length (25 years vs. 13 years) results in lower annual supplemental 

contribution “steps” and a lower ceiling on the supplemental contribution percentage at the end of

the plan. For collective bargaining agreements with an effective date other than January 1, 2010,

the schedule of Supplemental Contribution Percentages will be different but comparably lower 

than those from the Original Rehabilitation Plan. See the attached schedule entitled “2010 

Rehabilitation Plan Update.” Additionally, the employer is subject to a 10% Contribution 

Surcharge starting in 2010 until the Rehabilitation Plan is adopted through the collective 

bargaining process. 

As a reminder of how the Supplemental Contribution Percentages are applied, the following is an 

example for an employer with a base contribution rate for a pension contribution of $2.00 per

hour that adopts a collective bargaining agreement with an effective date January 1, 2010 that is 

in compliance with the Updated Rehabilitation Plan: 

WSOPE Pension Trust Rehabilitation Plan 

Application of Supplemental Contribution Percentages 

from the Updated Rehabilitation Plan

Year 

Supplemental 

Contribution 

Percentages 

Base 

Contribution 

(per hour) 

Supplemental 

Contribution 

(per hour) 

Total 

Contribution 

(per hour) 

2010 15% $2.00 $0.30 $2.30

2011 30% $2.00 $0.60 $2.60

2012 45% $2.00 $0.90 $2.90

2013 60% $2.00 $1.20 $3.20

2014 75% $2.00 $1.50 $3.50

2015 90% $2.00 $1.80 $3.80

2016 105% $2.00 $2.10 $4.10

2017 120% $2.00 $2.40 $4.40

2018 135% $2.00 $2.70 $4.70

2019 150% $2.00 $3.00 $5.00

2020 165% $2.00 $3.30 $5.30

2021 180% $2.00 $3.60 $5.60

2022 195% $2.00 $3.90 $5.90

2023 210% $2.00 $4.20 $6.20

2024 220% $2.00 $4.40 $6.40

2025 & later 220% $2.00 $4.40 $6.40

Effective January 1, 2010, the employer would contribute a total of $2.30 per hour to the Fund for 

each participating employee. Of this total, $2.00 per hour would be eligible for benefit accrual at

the 0.75% accrual rate, while the Supplemental Contribution amount ($0.30 per hour) would not 

be eligible for benefit accrual. In subsequent years, assuming the hourly base contribution is not 

increased, the Supplemental Contribution amount for this employer will increase by $0.30 per 

hour. 
The following chart shows a comparison of the progression of Supplemental and Total 

Contributions for the Updated Rehabilitation Plan versus the Original Rehabilitation Plan for

an employer with a $2.00 per hour base contribution rate. 

WSOPE Pension Trust Rehabilitation Plan 

Comparison of the Supplemental Contribution Amounts 

Updated Rehab Plan Original Rehab Plan

Year 

Supplemental 

Contribution 

(per hour) 

Total 

Contribution 

(per hour) 

Supplemental 

Contribution 

(per hour) 

Total 

Contribution 

(per hour) 

2010 $0.30 $2.30 $0.52 $2.52

2011 $0.60 $2.60 $1.04 $3.04

2012 $0.90 $2.90 $1.56 $3.56

2013 $1.20 $3.20 $2.08 $4.08

2014 $1.50 $3.50 $2.60 $4.60

2015 $1.80 $3.80 $3.12 $5.12

2016 $2.10 $4.10 $3.64 $5.64

2017 $2.40 $4.40 $4.16 $6.16

2018 $2.70 $4.70 $4.68 $6.68

2019 $3.00 $5.00 $5.20 $7.20

2020 $3.30 $5.30 $5.72 $7.72

2021 $3.60 $5.60 $6.24 $8.24

2022 $3.90 $5.90 $6.76 $8.76

2023 $4.20 $6.20 $7.28 $9.28

2024 $4.40 $6.40 $7.28 $9.28

2025 & later $4.40 $6.40 $7.28 $9.28

The schedule of Supplemental Contributions for the Updated Rehabilitation Plans is significantly 

lower than for the Original Plan. For an employer with a $2.00 per hour base pension 

contribution that adopts the Rehabilitation Plan effective January 1, 2010 pursuant to a 3-year 

collective bargaining agreement, the Supplemental contribution amount in 2012 (the last year of 

that collective bargaining agreement) is $0.90 per hour based on the Updated Rehabilitation Plan, 

compared to $1.56 per hour under the Original Plan, with smaller annual steps in the earlier years 

of the collective bargaining agreement. 

The intention of the Rehabilitation Plan is that each employer will pay a comparable share of the

cost needed to help the plan emerge from Red Zone regardless of the time of the initial collective 

bargaining agreement that adopts the Rehabilitation Plan. 

The Updated Rehabilitation Plan is effective January 1, 2010. Some employers and local unions 

entered into collective bargaining agreements prior to this notice. Therefore, contributions to the

Fund will be higher than required under the Updated Rehabilitation Plan. For example, a 

collective bargaining agreement with a $2.00 per hour contribution would require a contribution 

of $2.52 per hour under the original Rehabilitation Plan. However under the Updated

Rehabilitation Plan the contribution would be $2.30 per hour or $0.22 per hour less. The Pension 

Protection Act requires that a Rehabilitation schedule that is adopted in a collective bargaining 
agreement must remain in effect for the life of the collective bargaining agreement. The Board of

Trustees determined that for purposes of the Pension Protection Act that the Fund will recognize 

a mutual reopener of the collective bargaining agreement to adopt the Updated Rehabilitation 

Plan. If the parties to a collective bargaining agreement adopt the Updated Rehabilitation Plan, 

they should notify the Administrative Office and the extra payments will be credited as soon as 

administratively possible. A & I Benefit Plan Administrators will contact the parties who entered

into a collective bargaining agreement with the original Rehabilitation Plan. 

The Fund has employers who have an “automatic renewal” or “evergreen” contract. These 

contracts generally are for a specified time and automatically continue from year to year unless 

either party gives notice to reopen the contract. Generally the contracts are multiyear contracts

and the reopener is triggered by notice a specified time before the anniversary date of the 

contract. The Pension Protection Act requires that the Fund determine when these contracts 

“expire.” The reason is that a collective bargaining agreement is required to comply with the 

Rehabilitation Plan after the Rehabilitation Plan is adopted and a collective bargaining agreement 

“expires.” The Fund’s attorneys ruled that for purposes of the Pension Protection Act that an

“automatic renewal” or “evergreen” collective bargaining agreement expires at the end of the

original term in which the contract cannot be reopened. For example, if a collective bargaining

agreement is for the period of time from January 1, 2009 to December 31, 2012, and may be

reopened for the first time with notice as of December 31, 2011, the contract expires for purposes 

of the Rehabilitation Plan on December 31, 2011. The consequences are that the parties to the 

collective bargaining agreement are required by the Pension Protection Act to adopt the 

Rehabilitation Plan on or after January 1, 2012. If the parties do not adopt the Rehabilitation Plan 

within 180 days of December 31, 2011, the Pension Protection Act requires that the Fund impose 

the default Rehabilitation Plan on the collective bargaining parties. There will be a delinquent 

employer contribution if the employer does not comply with the default Updated Rehabilitation 

Plan. The Fund will then be required to sue the delinquent employer to collect the delinquent 

contributions. The reason is that the Board of Trustees has a fiduciary responsibility to comply

with the law and to protect all of the Fund’s participants and other contributing employers. 

Attached are Questions and Answers which help explain the current situation. 

For more information about this notice, you may contact: 

A & I Benefit Plan Administrators, Inc. 

1220 SW Morrison St., Suite 300 

Portland, OR 97205-2222 

Toll Free: (800) 413-4928; Local: (503) 222-7694