Exhibit 2: Page 1 of 16

WESTERN STATES OFFICE AND 

PROFESSIONAL EMPLOYEES PENSION FUND

THIRD SUSPENSION APPLICATION 

Exhibit 2

Exhibit 2: Page 3 of 16

Rael & Letson

999 Third Avenue, Suite 1530

Seattle, Washington 98104

206-456-3340 Tel

206-445-1840 Fax

www.rael-letson.com

ACTUARIAL CERTIFICATION REQUIRED UNDER

INTERNAL REVENUE CODE SECTION 432(b)

Western States Office and Professional Employees Pension Fund

Plan Year Beginning January 1, 2018

To: Secretary of the Treasury

Board of Trustees of the Western States Office and Professional Employees 

Pension Fund

From: Paul L. Graf, Plan Actuary

Date: March 30, 2018

Re: Western States Office and Professional Employees Pension Fund

EIN = 94-6076144; PN = 001

Plan Sponsor: Board of Trustees, Western States Office and Professional 

Employees Pension Fund

1220 S.W. Morrison St, Suite 300

Portland, Oregon 97205-2222

(503) 224-0048 

The following certifies that, in accordance with Internal Revenue Code Section 432(b), the 

Western States Office and Professional Employees Pension Fund (“the Plan”), as of the beginning of 

its 2018 Plan Year: 

is in critical and declining status 

As of January 1, 2018, the projections used for this certification estimate the Plan’s funded 

percentage to be 63.5% (below 80%). The Plan has an accumulated funding deficiency and is 

projected to be insolvent by December 31, 2036. Accordingly, the Plan is in critical and declining 

status for the 2018 Plan Year based on the criteria outlined in Internal Revenue Code Sections 

432(b)(2) and 432(b)(6). 
Rael & Letson

Prepared for Secretary of the Treasury; Board of Trustees of the 4

Western States Office and Professional Employees Pension Fund | March 30, 2018

Exhibit 2: Page 4 of 16

The basis for this certification is as follows: 

1. The projected present value of Plan liabilities as of the beginning of the 2018 Plan Year is 

based on the actuarial valuation as of January 1, 2017, and assumes no future liability gains 

or losses. The data, methodology, Plan provisions and assumptions utilized in the 

projection are those used for the January 1, 2017 actuarial valuation (except where noted 

otherwise in this document). The methods and assumptions are outlined in Exhibit I. 

2. An actuarial projection of the Actuarial Value of Assets is based on the unaudited financial 

statements as of December 31, 2017, as provided by the Administrator, and assumes no 

investment gains or losses on market values after that date. The December 31, 2017 Market 

Value of Assets and 2017 cash flow components provided by the Administrator are: 

a. Market Value as of December 31, 2017 $335,991,088 

b. 2017 Employer Contributions 9,751,244 

c. 2017 Benefit Payments 40,137,025

d. 2017 Operating Expenses 1,853,418

The assumptions and methodology utilized in the asset projection are those used for the 

January 1, 2017 actuarial valuation and are outlined in Exhibit I. 

3. Contributions for the current and succeeding plan years are projected assuming the terms 

of the current collective bargaining agreements pursuant to which the Plan is maintained 

continue in effect for succeeding plan years. Contributions include the automatic 10% 

employer surcharge for those contracts which have not yet been negotiated with terms 

consistent with the adopted Rehabilitation Plan. 

For purposes of evaluating critical and declining status, as outlined in Internal Revenue 

Code Section 432(b)(6), we have assumed contribution rates increase beyond the current 

CBA(s) in accordance with the adopted Rehabilitation Plan. The percent of total 

contributions attributable to surcharges and enhancements is assumed to be 80% of the 

accruing contributions beginning in 2018. In addition, the scheduled withdrawal liability 

payments for employers known to have withdrawn prior to January 1, 2018 are reflected in 

the projections. 

Based on input from the Board of Trustees, our projections assume that total hours worked 

remain constant at 2017 work levels after adjusting for withdrawn employers. 

 

4. The Plan received approval for a 5-year extension of charge bases effective for the Plan Year 

beginning January 1, 2009, as permitted under Internal Revenue Code Section 431(d). 

However, for the purpose of determining the Plan’s critical status, the applicable charge 

base extensions have not been reflected in these projections. 
Rael & Letson

Prepared for Secretary of the Treasury; Board of Trustees of the 5

Western States Office and Professional Employees Pension Fund | March 30, 2018

Exhibit 2: Page 5 of 16

5. The projections reflect the provisions of the Multiemployer Pension Reform Act of 2014 

(MPRA). This includes relevant inflationary increases under MPRA subsequent to 2018. 

The Plan’s annual operating expense assumption is $1,300,000 payable in monthly 

installments, excluding investment expenses, in 2018 and $1,000,000 in 2019 with a 2% 

annual increase assumed in subsequent plan years. 

6. The Plan was initially certified in critical status as of January 1, 2009. On 

October 16, 2009 the Board of Trustees adopted a Rehabilitation Plan under the guidelines 

of 432(e), which is updated and monitored annually. The Rehabilitation Plan includes 

certain adopted reductions in adjustable benefits effective January 1, 2010, and the 

Rehabilitation Period began January 1, 2012. Based on reasonable actuarial assumptions 

and upon exhaustion of all reasonable measures, the Plan cannot emerge from Critical 

Status, as described in Code Section 432(e)(3)(A)(ii). In 2012, the adopted Rehabilitation 

Plan was updated by the Plan Sponsor to include reasonable measures to forestall possible 

insolvency. Subsequently, the Plan was first certified in critical and declining status for the 

2016 Plan Year. 

Comments and Certification 

This certification has been prepared in accordance with our understanding of the requirements of 

Internal Revenue Code Section 432, the Preservation of Access to Care for Medicare Beneficiaries 

and Pension Relief Act of 2010, and the Multiemployer Pension Reform Act of 2014. To the best of 

our knowledge, the information supplied in this certification is complete and accurate and, in our 

opinion, the individual assumptions used in the projections: (a) are reasonably related to the 

experience of the Plan and to reasonable expectations; and (b) represent our best estimate of 

anticipated experience under the Plan. 

As an actuary for Rael & Letson, I am a member of the American Academy of Actuaries and meet the 

Qualification Standards of the American Academy of Actuaries to render the actuarial opinion 

contained herein. 

March 30, 2018 ________________________________________

Date Paul L. Graf, ASA, EA, MAAA 

Enrolled Actuary Number 17-05627 

Rael & Letson 

999 Third Avenue, Suite 1530 

Seattle, Washington 98104-3853 

(206) 456-3340 

cc: Kim Gould 

 Joe Reinhart, Esq. 

 Alex Miller 




Prepared for Secretary of the Treasury; Board of Trustees of the 10

Western States Office and Professional Employees Pension Fund | March 30, 2018

Exhibit 2: Page 10 of 16

EXHIBIT III 

TESTS OF FUND STATUS 

For the January 1, 2018 – December 31, 2018 Plan Year 

Critical Status Test

1. Is the Plan in critical status for the preceding plan year? YES 

2. Is the Plan projected to have an accumulated funding deficiency for the 

2018 Plan Year or any of the 9 succeeding plan years, without regard to the 

use of the shortfall funding method but taking into account any extensions of 

the amortization periods under Section 431(d) of the Code?

YES

3. If 2 is no, is the Plan projected to become insolvent in any of the 30 

succeeding plan years?

N/A

4. Result:

If 1 and 2 are both yes, then the Plan is in critical status based on the 

criteria outlined in Internal Revenue Code Section 432(e)(4)(B). 

If 2 and 3 are both no, then the Plan is projected to emerge from the Red 

Zone, and the zone status will be determined based on the criteria outlined 

in Internal Revenue Code Section 432(b). 

Critical Status

Critical and Declining Status

5. Is the Plan in critical status and projected to become insolvent within the 

current or the next 19 plan years (if the Fund’s number of inactives is more 

than twice the number of actives or the funding level is below 80%)?

YES

6. Result:

If 4. is critical status and 5. is yes, then the Plan is in critical and declining 

status. 

If 4. is critical status and 5. is no, then the Plan is in critical status 

Critical and 

Declining Status


Plan Year Beginning 1/1/2018 1/1/2019 1/1/2020 1/1/2021 

Plan Year Ending 12/31/2018 12/31/2019 12/31/2020 12/31/2021 A. Market Value at Beginning of Year 335,991,088 327,512,308 318,292,597 307,889,802 

B. Actuarial Value at Beginning of Year 333,673,882 321,865,238 311,302,914 304,134,340 

IncomeC. Base Contributions 3,066,191 3,066,191 3,066,191 3,066,191 

D. Supplemental/Surcharge Contributions 2,452,953 2,452,953 2,452,953 2,452,953 

E. Existing Withdrawal Liability Payments 5,399,755 5,601,289 5,589,320 5,587,218 

F. Future Withdrawal Liability Payments - - - - 

G. Total Investment Income 23,210,613 22,591,486 21,905,054 21,125,679 

DisbursementsH. Benefit Payments (a) Current Actives 1,808,566 2,507,570 3,075,639 3,568,157 

 (b) Current Inactive Vested 1,518,275 2,351,401 3,194,293 4,357,772 

 (c) Current Retirees/Beneficiaries 37,981,451 37,072,658 36,126,382 35,142,274 

 (d) Future New Entrants - - - -  (e) Total 41,308,292 41,931,629 42,396,314 43,068,203 

I. Administrative expenses 1,300,000 1,000,000 1,020,000 1,040,400 

J. Market Value at End of Year

(A+C+D+E+F+G-H(e)-I)

327,512,308 318,292,597 307,889,802 296,013,240 

K. Available Resources 

(A+C+D+E+F+G)

370,120,600 361,224,227 351,306,115 340,121,843 

L. Solvency Ratio (J / G(e)) 8.96 8.61 8.29 7.90 

M. Accrued Liability 525,114,709 521,272,908 516,506,642 510,913,294 

N. Funded Percentage (MVA) (A / M) 63.98% 62.83% 61.62% 60.26% O. Funded Percentage (AVA) (B / M) 63.54% 61.75% 60.27% 59.53% 

Western States Office and Professional Employees Pension Fund

Illustration of Projected Cash Flow and Solvency Ratio of the Extended Peri

Projection for Plan Years beginning January 1, 2018 through December 31, 2036

Exhibit 2: Page 13 of 16
Plan Year Beginning 1/1/2023 1/1/2024 1/1/2025 1/1/2026 

Plan Year Ending 12/31/2023 12/31/2024 12/31/2025 12/31/2026 A. Market Value at Beginning of Year 282,841,986 268,295,036 252,342,064 235,240,592 

B. Actuarial Value at Beginning of Year 282,841,986 268,295,036 252,342,064 235,240,592 

IncomeC. Base Contributions 3,066,191 3,066,191 3,066,191 3,066,191 

D. Supplemental/Surcharge Contributions 2,452,953 2,452,953 2,452,953 2,452,953 

E. Existing Withdrawal Liability Payments 5,568,514 5,563,724 5,563,724 5,563,724 

F. Future Withdrawal Liability Payments - - - - 

G. Total Investment Income 19,279,823 18,212,878 17,056,571 15,820,394 

DisbursementsH. Benefit Payments (a) Current Actives 4,360,370 4,668,622 4,938,165 5,181,591 

 (b) Current Inactive Vested 6,398,086 7,486,132 8,298,201 9,073,095 

 (c) Current Retirees/Beneficiaries 33,065,821 31,972,733 30,843,287 29,678,164 

 (d) Future New Entrants 7,721 17,149 35,095 57,851  (e) Total 43,831,999 44,144,637 44,114,748 43,990,701 

I. Administrative expenses 1,082,432 1,104,081 1,126,162 1,148,686 

J. Market Value at End of Year

(A+C+D+E+F+G-H(e)-I)

268,295,036 252,342,064 235,240,592 217,004,468 

K. Available Resources 

(A+C+D+E+F+G)

313,209,467 297,590,782 280,481,503 262,143,854 

L. Solvency Ratio (J / G(e)) 7.15 6.74 6.36 5.96 

M. Accrued Liability 496,626,745 488,104,375 478,640,162 468,520,766 

N. Funded Percentage (MVA) (A / M) 56.95% 54.97% 52.72% 50.21% O. Funded Percentage (AVA) (B / M) 56.95% 54.97% 52.72% 50.21% 

Western States Office and Professional Employees Pension Fund

Illustration of Projected Cash Flow and Solvency Ratio of the Extended Peri

Projection for Plan Years beginning January 1, 2018 through December 31, 2036

Exhibit 2: Page 14 of 16
Plan Year Beginning 1/1/2028 1/1/2029 1/1/2030 1/1/2031 

Plan Year Ending 12/31/2028 12/31/2029 12/31/2030 12/31/2031 A. Market Value at Beginning of Year 197,545,439 177,060,813 155,560,750 133,071,518 

B. Actuarial Value at Beginning of Year 197,545,439 177,060,813 155,560,750 133,071,518 

IncomeC. Base Contributions 3,066,191 3,066,191 3,066,191 3,066,191 

D. Supplemental/Surcharge Contributions 2,452,953 2,452,953 2,452,953 2,452,953 

E. Existing Withdrawal Liability Payments 5,545,476 5,545,476 5,540,099 5,532,177 

F. Future Withdrawal Liability Payments - - - - 

G. Total Investment Income 13,104,441 11,635,736 10,096,907 8,487,658 

DisbursementsH. Benefit Payments (a) Current Actives 5,572,569 5,752,742 5,860,579 5,991,459 

 (b) Current Inactive Vested 10,527,074 11,101,821 11,670,677 12,198,041 

 (c) Current Retirees/Beneficiaries 27,246,394 25,984,106 24,695,020 23,383,280 

 (d) Future New Entrants 112,558 142,755 175,731 211,051  (e) Total 43,458,595 42,981,424 42,402,007 41,783,830 

I. Administrative expenses 1,195,093 1,218,994 1,243,374 1,268,242 

J. Market Value at End of Year

(A+C+D+E+F+G-H(e)-I)

177,060,813 155,560,750 133,071,518 109,558,425 

K. Available Resources 

(A+C+D+E+F+G)

221,714,500 199,761,169 176,716,900 152,610,497 

L. Solvency Ratio (J / G(e)) 5.10 4.65 4.17 3.65 

M. Accrued Liability 446,430,160 434,655,477 422,521,597 410,108,433 

N. Funded Percentage (MVA) (A / M) 44.25% 40.74% 36.82% 32.45% O. Funded Percentage (AVA) (B / M) 44.25% 40.74% 36.82% 32.45% 

Western States Office and Professional Employees Pension Fund

Illustration of Projected Cash Flow and Solvency Ratio of the Extended Peri

Projection for Plan Years beginning January 1, 2018 through December 31, 2036

Exhibit 2: Page 15 of 16
Plan Year Beginning 1/1/2033 1/1/2034 1/1/2035 1/1/2036

Plan Year Ending 12/31/2033 12/31/2034 12/31/2035 12/31/2036A. Market Value at Beginning of Year 84,955,717 58,519,958 30,501,099 728,538

B. Actuarial Value at Beginning of Year 84,955,717 58,519,958 30,501,099 728,538

IncomeC. Base Contributions 3,066,191 3,066,191 3,066,191 3,066,191

D. Supplemental/Surcharge Contributions 2,452,953 2,452,953 2,452,953 2,452,953

E. Existing Withdrawal Liability Payments 4,748,644 4,127,987 3,495,231 3,208,835

F. Future Withdrawal Liability Payments - - - - G. Total Investment Income 5,019,053 3,114,126 1,092,472 (1,040,392)

DisbursementsH. Benefit Payments (a) Current Actives 6,218,600 6,246,446 6,286,791 6,307,124

 (b) Current Inactive Vested 13,181,199 13,488,744 13,821,384 14,069,264

 (c) Current Retirees/Beneficiaries 20,712,538 19,365,570 18,019,968 16,683,368

 (d) Future New Entrants 290,784 333,488 378,479 425,530

 (e) Total 40,403,121 39,434,248 38,506,622 37,485,286

I. Administrative expenses 1,319,479 1,345,868 1,372,786 1,400,241

J. Market Value at End of Year

(A+C+D+E+F+G-H(e)-I)

58,519,958 30,501,099 728,538 Insolvent

K. Available Resources 

(A+C+D+E+F+G)

100,242,558 71,281,215 40,607,946 8,416,125

L. Solvency Ratio (J / G(e)) 2.48 1.81 1.05 0.22

M. Accrued Liability 384,496,263 371,397,607 358,353,295 345,324,521

N. Funded Percentage (MVA) (A / M) 22.10% 15.76% 8.51% 0.21%O. Funded Percentage (AVA) (B / M) 22.10% 15.76% 8.51% 0.21%

Western States Office and Professional Employees Pension Fund

Illustration of Projected Cash Flow and Solvency Ratio of the Extended Peri

Projection for Plan Years beginning January 1, 2018 through December 31, 2036

Exhibit 2: Page 16 of 16