1 

STATEMENT OF REHABILITATION PLAN 

FOR 2019 

I. Introduction

As required under the Employee Retirement Income Security Act (“ERISA”) 

as amended by the Pension Protection Act of 2006 (“PPA”), on March 27, 

2009, the actuary of the Building Material Drivers Union Local 436 Pension 

Plan ( the “Fund”) first certified that the Fund was in Critical Status for the 

Plan Year beginning January 1, 2009. 

In subsequent annual certifications through 2014 the actuary certified that 

the Fund was still in Critical Status. However, since 2015 it has been

certified to be in a Critical and Declining Status, a status added by the 

Multiemployer Pension Reform Act.

Once the Fund was certified to be in Critical Status, the Board of Trustees 

sent a Notice of Critical Status, to interested parties informing them, in part, 

that (1) the Fund was in Critical Status for the 2009 Plan Year; (2) that 

certain adjustable benefits might be reduced or removed (3) that employers

participating in the Fund (“Employers”) would be obligated to pay a 5% 

contribution surcharge to the Fund during the initial Critical year, and (4) 

that the 5% surcharge would increase to 10% in subsequent years.

The 5% contribution surcharge became effective with respect to 

contributions owed for work performed on and after May 28, 2009. It will 

continue until the earliest of (1) the date the Fund emerges from Critical 

Status; (2) the date the Employer enters into a new collective bargaining 

agreement (“CBA”) with Teamsters Union Local 436 (the “Union”) based on 

this Rehabilitation Plan and the attached Schedules, as amended from time 

to time; or (3) the date the Default Schedule described below becomes 

effective with respect to the Employer as a result of the bargaining parties 

failing to agree on the Schedule to be applied. 

Under ERISA, the Fund generally will be considered to have emerged from 

Critical Status when the Fund actuary certifies that the Fund is not projected 

to have an accumulated funding deficiency for a Plan Year or any of the 

next nine Plan Years, using specified actuarial assumptions and that the 

criteria that caused its Critical Status has been corrected. 

The Fund must emerge from Critical Status by the end of its Rehabilitation 

Period. The Fund’s Rehabilitation Period will begin on January 1, 2012 and 

will end ten years later on December 31, 2021. 

If it is projected that the Fund will not emerge from Critical by the end of its 

Rehabilitation Period, it must take “all reasonable measures” which enable 

it to emerge at a later date or which forestall its possible insolvency. 

Exhibit 7.09 

Most recently updated Rehabilitation Plan (Checklist Item #40)

IBT436-0320
2 

In the absence of guidance and direction from the Internal Revenue Service 

in this regard, the Plan’s Board of Trustees believes that its actions to date 

constitute “all reasonable measures”. Currently, all active employers have 

adopted this Rehabilitation Plan for the duration of their most recent 

collective bargaining agreement. On this basis it is believed that the Fund 

is making scheduled progress in meeting the requirements of its 

Rehabilitation Plan as discussed in IRC §432(b)(3)(A)(ii).

The 2009 Rehabilitation Plan, and the attached Schedules which implement 

it, were based on Fund information as of January 1, 2009 and on reasonable 

assumptions about how the Fund’s assets and liabilities will change in the 

coming years, particularly as a result of changes in the Fund’s investment 

returns, which are dependent on financial markets. 

More specifically, the assumptions used for these projections were the 

same as those used in the January 1, 2009 actuarial valuation of the Fund. 

In addition, based on the advice of the Board of Trustees an assumption 

regarding the future level of work was added. This assumption is not 

necessary to perform the annual actuarial valuation.

The Building Material Drivers Union Local 436 Pension Plan 2009 

Rehabilitation Plan and the Schedules which implement it will apply to all 

Collective Bargaining Agreements adopted after its effective date 

November 16, 2009. As required under law, each year after it was adopted; 

this Rehabilitation Plan will be reviewed. If necessary, the Schedules 

implementing it will be revised to make sure that adequate progress is being 

made in achieving its goals. 

Any revised Schedules will not affect any Collective Bargaining Agreement 

that has previously been negotiated under the Rehabilitation Plan unless 

specified in such agreement. The Board of Trustees has the sole discretion 

to amend and construe this Rehabilitation Plan, including the Schedules.

II. The Rehabilitation Plan

The Building Material Drivers Union Local 436 Pension Plan 2009 

Rehabilitation Plan was adopted by its Board of Trustees at its November 

16, 2009 Board meeting. It gives bargaining parties three choices of benefit

levels with three corresponding contribution levels. It also includes a Default

Option. 

The Default Option is triggered if the Union and an Employer cannot reach 

an agreement regarding the benefit level and contribution rate that will apply 

prospectively to the Employer’s participating Employees. The Default 

Schedule becomes effective on the earlier of the date that the Secretary of

Exhibit 7.09 

Most recently updated Rehabilitation Plan (Checklist Item #40)

IBT436-0321
3 

Labor declares that the bargaining is at an impasse or 180 days after the 

expiration of the collective bargaining agreement.

The general intent of the Building Material Drivers Union Local 436 Pension 

Plan 2009 Rehabilitation Plan is to remove all adjustable benefits permitted 

under law, to provide the bargaining parties with three choices of accrual 

rates for benefits earned under a new CBA, and to require annual increases 

in the contribution rates for the next five years to a level that results in the 

Fund exiting from Critical Status by the end of its Rehabilitation Period, if

the underlying assumptions are met or exceeded in aggregate. 

The adjustable benefits that will be removed are as follows: 

Payment of a minimum of sixty months regardless of whether the 

participant is still alive (Instead benefits will only be paid while the 

participant is alive.).

Payment of disability benefits unless a participant already qualifies

for these benefits before a new CBA is adopted. 

Payment of a $5,000 lump sum death benefit for death after 

retirement for active participants not retired as of the effective date 

of the Rehabilitation plan or who have not retired before a new CBA 

is adopted.

Early retirement before age 62. Early retirement will only be allowed 

between age 62 and age 65.

For current members of the bargaining unit, benefit accrual rates and 

contribution rates (including the 5%/10% surcharge) will remain unchanged 

and no adjustable benefits will be removed until a new CBA that reflects the 

requirements of this Rehabilitation Plan is adopted or the Default Option 

becomes operative. 

The three benefit levels in Options A, B, and C that comprise the

Rehabilitation Plan are the same in that the same adjustable benefits will 

be removed from all of them. They differ only in the level of future benefit

accruals that will be earned under each of them relative to the benefit

accruals before the implementation of this Rehabilitation Plan. The options 

are as follows: 

Option A 100% of benefit before Rehabilitation Plan

Option B 50% of benefit before Rehabilitation Plan

Option C 0% of benefit before Rehabilitation Plan, i.e. 

benefits are frozen

Exhibit 7.09 

Most recently updated Rehabilitation Plan (Checklist Item #40)

IBT436-0322
4 

The Default Option also removes the same adjustable benefits mentioned 

above. However, the PPA also requires that any monthly benefit accrual 

rate that exceeds 1% of annual contributions must be reduced to that level.

For participants that are not part of the bargaining unit, (vested terminated 

participants and participants receiving normal retirement or disability 

retirement benefits) adjustable benefits will be removed after they have 

been given the required thirty day notice. The adjustable benefits that will 

be removed depend on the participant’s status in the Plan as follows:

Vested Terminated Sixty month guarantee

 Restricted early retirement

$5,000 Death Benefit 

Non-Disability Retirement No changes

Disability Retirement No changes

III. Schedules

The benefit schedules that implement this 2018 Rehabilitation Plan and 

which must be provided to the bargaining parties by December 24, 2019 

are attached as Table 1 of this document.

Exhibit 7.09 

Most recently updated Rehabilitation Plan (Checklist Item #40)

IBT436-0323


Building Material Drivers Local 

436 Pension Fund 

Actuarial Valuation Report 

as of January 1, 2019 

Produced by Cheiron 

May 2020

Exhibit 7.10 

January 1, 2019 Actuarial Valuation Report (Checklist Item #40)

IBT436-0326
TABLE OF CONTENTS

Section Page 

Transmittal Letter...................................................................................................................................................................................... i 

Foreword .................................................................................................................................................................................................. ii

Section I Summary ........................................................................................................................................................................... 1 

Section II Identification and Assessment of Risk .............................................................................................................................. 7 

Section III Assets ................................................................................................................................................................................ 9 

Section IV Liabilities ........................................................................................................................................................................ 11 

Section V Costs and Contributions .................................................................................................................................................. 15 

Section VI Withdrawal Liability ....................................................................................................................................................... 25 

Section VII FASB ASC Topic No. 960 Disclosures .......................................................................................................................... 27 

Appendices 

Appendix A Membership Information ................................................................................................................................................ 28 

Appendix B Summary of Major Plan Provisions ................................................................................................................................ 31 

Appendix C Actuarial Assumptions and Methods .............................................................................................................................. 36

Exhibit 7.10 

January 1, 2019 Actuarial Valuation Report (Checklist Item #40)

IBT436-0327

BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2019 

FOREWORD 

ii

Cheiron has performed the Actuarial Valuation of the Building 

Material Drivers Local 436 Pension Fund as of January 1, 

2019. The purpose of this report is to: 

1) Measure and disclose, as of the valuation date, the 

financial condition of the Plan; 

2) Provide specific information and documentation 

required by the Federal Government and the Auditors 

of the Plan; 

3) Determine whether negotiated contributions support the 

current level of benefits and whether they fall within 

the acceptable range of contributions under the Plan for 

the 2019 plan year; and 

4) Compare assets with the value of vested benefits to 

determine allocable plan Withdrawal Liability, if any. 

An actuarial valuation establishes and analyzes plan assets, 

liabilities, and contributions on a consistent basis and traces 

their progress from one year to the next. It includes 

measurement of the Plan’s investment performance as well as 

an analysis of actuarial liability gains and losses. The valuation 

report is organized as follows: 

Section I Summary presents key valuation results and 

compares this year’s results to last year’s results. It also 

provides the historical summary and future outlook of the Plan. 

Section II Assets contains exhibits relating to the valuation 

of assets. 

Section III Liabilities shows the various measures of 

liabilities. 

Section IV Costs and contributions develop the minimum 

and maximum contributions. 

Section V Withdrawal Liability shows the development of 

the UVB (Unfunded Vested Benefits) as of January 1, 2019 

that would be allocated to employers that withdraw before 

December 31, 2019. 

Section VI FASB ASC Topic No. 960 Disclosure provides 

information required by the Plan’s Auditor. 

The appendices to this report contain a summary of the Plan’s:

 membership at the valuation date, 

 major plan provisions, and 

 actuarial methods and assumptions used in the valuation. 

In preparing our report, we relied on information (some oral 

and some written) supplied by the Plan Administrator and the 

Plan Auditor. This information includes, but is not limited to, 

the plan provisions, employee data, and financial information. 

We performed an informal examination of the obvious 

characteristics of the data for reasonableness and consistency in 

accordance with Actuarial Standards of Practice No. 23. 

The actuarial assumptions, taken individually, reflect our 

understanding and best estimate of the likely future experience 

of the Plan. Future results may differ significantly from current 

results presented in this report due to such factors as the 

following: plan experience differing from that anticipated by 

the assumptions, changes in assumptions, and changes in plan 

provisions or applicable law. 

Exhibit 7.10 

January 1, 2019 Actuarial Valuation Report (Checklist Item #40)

IBT436-0329
BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2019 

SECTION I – SUMMARY 

1 

Exhibit 7.10 

January 1, 2019 Actuarial Valuation Report (Checklist Item #40)

IBT436-0330

 
BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2019 

SECTION I – SUMMARY 

2 

Following is an analysis of the Plan’s results for the prior year 

followed by statutory considerations (PPA and MPRA), 

historical results for the last ten years and projections of the 

future.

Prior Year Results 

The Plan’s projected insolvency is not a new finding for 2019. 

However, its financial condition has deteriorated further.

Investment and liability experience and their effect on the Plan’s

policy cost traditionally have been the focus of year-to-year 

analyses. 

 In 2018, the return on market value was -6.10%. In dollar 

terms, during 2018 the Plan had a loss of $3,718,507 from 

investments. This is the amount by which investment returns 

were less than what returns would have been at the assumed 

return rate of 7.00%.

 For various purposes, including the determination of its 

annual Minimum Required Contribution (MRC), the Plan 

uses an Actuarial Value of Assets (AVA) which smoothie’s

annual investment gains or losses over a period of five years. 

The Actuarial Value of Assets returned 3.46% resulting in a 

$998,403 experience loss (the difference between expected 

returns at 7.00% and the actual returns) from investments for 

MRC calculations. 

 The Plan experienced a liability gain of $4,117,539 and a 

small loss on expected administrative expenses of $68,371. 

When combining these with the AVA asset loss of $998,403 

from investments, the Plan experienced a total net experience 

gain of $3,050,765 for determining ERISA minimum 

funding requirements. This amount will be amortized over 15 

years and subtracted from future Minimum Required 

Contributions. 

 Using the Market Value of Assets, the funded ratio of 

Actuarial Liability decreased from 26.3 to 21.9%. The Plan 

has been less than 60% funded since 2005. 

 At the end of 2018, the Plan had a Funding Standard Account 

Funding Deficiency. Prior to the Pension Protection Act of 

2006 (PPA) this would have triggered an excise tax and 

would have been a matter of great concern. Post-PPA, 

Critical plans like this one that have adopted a Rehabilitation 

Plan are exempt from this excise tax. 

 Combining the previously mentioned liability, administrative 

expense, and market value investment experience, the Board 

Policy Cost increased from $12,881,262 to $13,047,594. On 

an hourly basis, the Board Policy Cost increased from $46.84 

per hour to $47.45 per hour. This cost compares to expected 

income of $8.50 per hour from negotiated contributions. 

Traditionally, this gap between income and cost would have 

been addressed through bargaining for increased 

contributions. In this case, however, it will have to be 

addressed through MPRA permitted actions including a 

PBGC partition or future legislative help. 

 Annual benefit payments and expenses were $9,551,739. 

Contributions, Withdrawal Liability payments and a onetime litigation settlement payment were $5,223,999. 

Consequently, the Plan had a negative cash flow during 2018 

without including its investment returns. 

Exhibit 7.10 

January 1, 2019 Actuarial Valuation Report (Checklist Item #40)

IBT436-0331
BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2019 

SECTION I – SUMMARY 

3 

Without compensating investment returns the Plan must have 

a positive cash flow in order to grow. Due to the large 

negative cash flow situation, the Plan is, and will continue to 

be, particularly vulnerable to investment risk. As a 

consequence of this unmanageable negative cash flow, the 

biggest challenge facing the Plan is its projected insolvency. 

Pension Protection Act 

The Pension Protection Act of 2006 added a significant layer of 

new considerations related to the Plan’s PPA Funded status. 

 The Plan has been in Critical status in every year since the 

implementation of the law except for 2008 when it was in 

Endangered status. 

 In an effort to correct the Plan’s Critical status, as required 

by the PPA, a Rehabilitation Plan was adopted by the Board 

of Trustees in November 2009. The Rehabilitation Plan 

included contribution rate increases and the removal of 

certain benefits previously provided. 

 As also required, a review and possible update to the 

Rehabilitation Plan has occurred each November. However, 

the initial Rehabilitation Plan has never been modified since 

the Board believes it has taken all reasonable measures under 

PPA that it can to forestall insolvency. 

Multiemployer Pension Reform Act of 2014 

Because the provisions of PPA were proving inadequate for 

helping severely under-funded plans address their problems the 

Multiemployer Pension Reform Act of 2014 (MPRA) was 

passed in December 2014. MPRA modified PPA. 

On March 30, 2018, the Plan was again certified to be in 

Critical and Declining status because it is Critical and is 

projected to be insolvent within 19 years. 

The Critical and Declining provisions of the law permit benefit 

reductions and the partition of some liabilities to the Pension 

Benefit Guaranty Corporation. These may give plans like this 

one a means for avoiding the insolvency mentioned in the 

previous section. 

Exhibit 7.10 

January 1, 2019 Actuarial Valuation Report (Checklist Item #40)

IBT436-0332



BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2019 

SECTION II – IDENTIFICATION AND ASSESSMENT OF RISK 

7 

Actuarial valuations are based on a set of assumptions about 

future economic and demographic experience. In our opinion, 

the assumptions we are using are our best estimate of the 

Plan’s long-term future experience. 

Nonetheless, it is important to realize that future experience 

could deviate, sometimes significantly, from that predicted by 

our assumptions. This deviation of actual experience compared 

to expected experience can affect the future viability of the 

Plan and must be monitored closely. 

This section of the report is intended to identify the primary 

risks to this Plan, provide some background information about 

those risks and the factors that influence them, and provide an 

assessment of them. 

Identification of Risks 

The primary risk that every plan faces is future insolvency. 

This is the risk that its current assets and future contributions 

are or will be inadequate to fund all plan benefits. For some 

plans, this risk is small. For others it is significant. This 

insolvency risk can manifest itself in several different ways: 

o An impending insolvency date, a near term date when 

its assets will be completely depleted; 

o Funded ratio currently less 100% and 

o Funded ratios that are never expected to exceed 100%. 

As shown in the previous section, under the baseline 

projection scenario, the Plan is currently 21.9% funded and is 

projected to become insolvent during the 2023 plan year. 

The remainder of this section focuses on the key measures and 

some of the risk factors that might impact them. While there 

are a number of other risk factors that could lead to assets and 

future contribution amounts being inadequate, we believe the 

primary risk factors for this Plan are: 

• Investment returns, and 

• Contributions. 

Other risk factors that are not explicitly identified may also 

turn out to be important. 

Investment Risk is the potential for investment returns to be 

less than expected. The current assumption for investment 

returns is 7.00% per year net of investment expenses. This is a 

long-term expectation. In any given year, investment returns 

will be greater than or less than this assumption. Lower 

investment returns than anticipated will decrease the expected 

future funding ratio.

The potential volatility of future investment returns is 

influenced by economic conditions and the Fund’s asset 

allocation. A plan with an investment portfolio generating 

higher expected rates of return may anticipate lower future 

contribution requirements. However, this approach also comes 

with higher amounts of volatility. The impact of the investment 

risk is correlated to the amount of assets invested relative to the 

size of the contribution base. 

Exhibit 7.10 

January 1, 2019 Actuarial Valuation Report (Checklist Item #40)

IBT436-0336

BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2019 

SECTION III – ASSETS 

9 

Assets at Market Value 

Market values represent “snap-shot” or “cash-out” values, 

which provide the principal basis for measuring financial 

performance from one year to the next. 

Changes in Market Value 

The components of asset change are: 

 Contributions 

 Benefit payments 

 Expenses 

 Investment income (realized and unrealized) 

The specific changes during 2018 are presented below: 

Exhibit 7.10 

January 1, 2019 Actuarial Valuation Report (Checklist Item #40)

IBT436-0338
BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2019 

SECTION III – ASSETS 

10 

Assets at Actuarial Value 

For funding purposes, the Plan uses an Actuarial Value of 

Assets which smoothies market related fluctuations in the 

Market Value of Assets, generally over five years. This causes 

less volatile cost and minimum funding requirements from year 

to year. 

The method used for determining the Actuarial Value of Assets 

recognizes the excess of actual asset return over expected 

returns at the rate of 20% per year over five years. 

The table that follows shows the development of the Actuarial 

Value of Assets. 

Actuarial Gains or Losses from Investment Performance 

The following table calculates the investment related actuarial 

gain/loss for the plan year, the return, and the rate of return on 

both a market value and actuarial value basis. The market value 

rate of return is an appropriate measure for comparing the 

actual return of to the long-term 7.00% assumption. 

The actuarial investment gain/loss on the actuarial value is one 

component of the Plan’s actuarial experience gain/loss which is 

recognized in minimum funding requirements. The rate of 

return on an Actuarial Value of Assets basis was 3.47%, which 

is less than the 7.00% assumption. Therefore, there was an 

actuarial investment loss for funding purposes. 

Exhibit 7.10 

January 1, 2019 Actuarial Valuation Report (Checklist Item #40)

IBT436-0339

 

 
BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2019 

SECTION IV – LIABILITIES

11 

In this section, we present detailed information on Plan 

liabilities including:

 Disclosure of plan liabilities at January 1, 2018, and 

January 1, 2019; and 

 Statement of changes in these liabilities during the year. 

Disclosure 

Several types of liabilities are calculated and presented in this 

report. Each type is distinguished by the purpose for which it is 

used. 

 Present Value of Future Benefits: Used for analyzing the 

financial outlook of the Plan, this represents the amount of 

money needed today, to fully pay off all future benefits of 

the Plan, assuming participants continue to accrue benefits. 

 Actuarial Liabilities: Used for ensuring minimum funding 

standards are met, this liability is determined using an 

actuarial funding method to apportion the Present Value of 

Future Benefits between the past and the future. 

For this Plan that method is the Unit Credit funding 

method. The Actuarial Liability under the Unit Credit 

funding method represents the total amount of money 

needed to fully pay off all future obligations of the Plan, 

assuming no further accrual of benefits. 

This liability is required for accounting disclosures by 

FASB ASC Topic No. 960. For that purpose, it is referred 

to as the Present Value of Accumulated Benefits. In 

addition, it is required to determine the Plan’s funded ratio 

for determining its funded status under the Pension 

Protection Act of 2006. It can also be used to establish 

comparative benchmarks with other plans. 

 Vested Liabilities: This liability represents the portion of 

the Actuarial Liabilities that are vested. After removing 

certain vested benefits according to PBGC regulations and 

adding administrative expense, this liability is used to 

determine the Unfunded Vested Benefits (UVB) used in 

Withdrawal Liability assessments. 

 Current Liabilities: Used for statutory compliance 

purposes, the calculation of this liability is defined by law 

and IRS Regulations and is used to determine maximum 

allowable tax-deductible contributions. 

The table on the following page discloses each of these 

liabilities for the current valuation and the prior one. With 

respect to each disclosure, a subtraction of the appropriate 

value of plan assets yields, for each respective type, a net 

surplus, or an unfunded liability. 

Exhibit 7.10 

January 1, 2019 Actuarial Valuation Report (Checklist Item #40)

IBT436-0340



BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2019 

SECTION V – COSTS AND CONTRIBUTIONS 

15 

In this section, detailed information on plan costs and 

contributions is presented from two perspectives:

 The actuarially determined Board Policy Cost and 

 Statutory amounts, which could affect the above. 

Board Policy Cost 

The Board Policy Cost is based on criteria established by the 

Board of Trustees. It is determined in two parts. The first part 

is the Unit Credit Normal Cost. This is the value of the new 

future benefits accrued and expenses expected to be paid over 

the coming year. 

The second part is an amortization payment to pay off the 

Unfunded Actuarial Liability. The Unfunded Actuarial 

Liability is the difference between the Market Value of Assets 

of the Plan at the valuation date and Actuarial Liability as 

determined by the actuarial cost method. This amount is 

amortized over 10 years. 

In theory, if income from contributions and Withdrawal 

Liability payments equal to the Board Policy Cost are made for 

ten years the Plan will be completely funded. In reality, the 

expected income from contributions and withdrawal payments 

is far less than this amount and will not reduce the Unfunded 

Actuarial Liability this year. The shortfall will increase next 

year’s Board Policy Cost. 

Statutory Amounts

ERISA and the IRS tax code produce various requirements on 

the contributions made to qualified pension plans. These 

amounts impact the minimum that must be paid, the maximum 

that can be deducted, and the timing of contributions. 

To ensure that minimum contributions are met, pension plans 

are required to retain an enrolled actuary to complete Schedule 

MB to Form 5500 on an annual basis. Because the bargained 

contributions exceeded the Minimum Required Contribution in 

years past, the Plan built up a Credit Balance. However, that is 

no longer the case. The Credit Balance is being used to make 

up the difference between the Minimum Required Contribution 

and bargained contributions and withdrawal payments. 

The actuarially determined Board Policy Cost for 2019 is 

compared to the statutory amounts on the next table and to the 

expected contributions from all sources. The table also shows 

the Board Policy Cost and expected contributions per hour. 

Exhibit 7.10 

January 1, 2019 Actuarial Valuation Report (Checklist Item #40)

IBT436-0344

BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2019 

SECTION V – COSTS AND CONTRIBUTIONS

17 

Exhibit 7.10 

January 1, 2019 Actuarial Valuation Report (Checklist Item #40)

IBT436-0346

 

 



BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2019 

SECTION V – COSTS AND CONTRIBUTIONS

21 

as of January 1, 2019

Beginning

Initial 1/1/2019 Remaining of Year

Date Initial Amortization Outstanding Amortization Amortization

Charge Bases (continued) Established Amount Years Balance Years* Amount

24. Experience Loss 1/1/2003 N/A 15 $ 1,409,010 4 $ 388,766

25. Experience Loss 1/1/2004 N/A 30 753,462 20 66,469

26. Experience Loss 1/1/2004 N/A 15 1,217,993 5 277,624

27. Experience Loss 1/1/2005 N/A 30 474,637 21 40,938

28. Experience Loss 1/1/2005 N/A 15 765,833 6 150,158

29. Experience Loss 1/1/2006 $ 2,537,636 15 1,282,837 7 222,462

30. Experience Loss 1/1/2007 1,579,662 15 897,596 8 140,484

31. Plan Change 1/1/2008 75,028 15 47,081 9 6,754

32. Experience Loss 1/1/2008 1,103,099 15 692,253 9 99,300

33. Experience Loss 1/1/2009 9,404,102 15 4,319,258 5 984,511

34. Experience Loss 1/1/2011 2,235,704 15 1,340,136 7 232,399

35. Experience Loss 1/1/2012 4,149,340 15 2,746,493 8 429,859

36. Experience Loss 1/1/2013 706,186 15 508,337 9 72,919

37. Experience Loss 1/1/2014 2,736,150 15 2,116,503 10 281,628

38. Experience Loss 1/1/2015 66,206 15 54,508 11 6,793

39. Assumption Change 1/1/2015 9,398,219 15 7,737,686 11 964,368

40. Plan Amendment 1/1/2015 1,815,792 15 1,494,967 11 186,322

41. Experience Loss 1/1/2016 2,838,461 15 449,353 12 52,873

42. Assumption Change 1/1/2016 515,274 15 2,475,320 12 291,260

43. Experience Loss 1/1/2017 458,040 15 420,310 13 47,000

44. Assumption Change 1/1/2017 11,884,102 15 10,905,151 13 1,219,449

45. Experience Loss 1/1/2018 1,347,495 15 1,293,872 14 138,269

46. Assumption Change 1/1/2019 91,944 15 91,944 15 9,435

Schedule of Amortizations Required for Minimum Required Contribution

Table IV-5b

Exhibit 7.10 

January 1, 2019 Actuarial Valuation Report (Checklist Item #40)

IBT436-0350








BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2019 

APPENDIX A – MEMBERSHIP INFORMATION 

30 

Exhibit 7.10 

January 1, 2019 Actuarial Valuation Report (Checklist Item #40)

IBT436-0359




BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2019 

APPENDIX B – SUMMARY OF MAJOR PLAN PROVISIONS 

35 

6. Early Retirement 

a. Eligibility For benefits earned after an employer adopted the Rehabilitation Plan, eligibility is the attainment of age 62 and 

completion of 15 years of Credited Service. 

b. Amount Benefit is the actuarially reduced accrued benefit for commencement prior to Normal Retirement date. 

7. Deferred Vested Retirement 

a. Eligibility Eligibility is the completion of five years of vesting service. 

b. Amount Benefit is the normal pension actuarially reduced if payments begin prior to age 65. 

8. Pre-Retirement Surviving Spouse Benefit 

If a vested participant is eligible for pension, but dies prior to commencement of benefits, the surviving spouse is entitled to the 

benefit the spouse would have received had the participant retired with the 50% Joint and Survivor form in effect, then died. 

If a vested participant is not eligible to begin receiving pension and dies prior to commencement of benefits, the surviving spouse 

is entitled to the benefit the spouse would have received had the participant terminated employment on the date of death with 

deferred vested benefit, survived to the earliest possible eligibility date and then retired with the 50% Joint and Survivor form in 

effect, then died. 

9. Changes since Last Valuation

All employers have adopted the Rehabilitation Plan, which removed disability benefits, lump-sum death benefits, and the five-year 

certain provision of the Plan’s normal form of payment. 

Exhibit 7.10 

January 1, 2019 Actuarial Valuation Report (Checklist Item #40)

IBT436-0364

BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2019 

APPENDIX C – ACTUARIAL ASSUMPTIONS AND METHODS 

37 

5. Marital Status

For participants not receiving benefits, 80% of the male 

participants and 50% of the female participants will 

have a surviving spouse with wives assumed to be three 

years younger than husbands are. 

6. Administrative Expenses

$670,000 assumed payable at the beginning of the year. 

Five years of administrative expenses are included to 

determine the value of vested benefits when calculating 

Withdrawal Liability. 

7. Changes in Assumptions Since Last Valuation

As required, the Current Liability interest rate and 

mortality were updated. The interest rate went from 

2.98% to 3.06%. 

Exhibit 7.10 

January 1, 2019 Actuarial Valuation Report (Checklist Item #40)

IBT436-0366
BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2019 

APPENDIX C – ACTUARIAL ASSUMPTIONS AND METHODS 

38 

B. Actuarial Methods 

1. Asset Valuation Method 

The valuation assets are determined as the market value 

less (1) 80% of the investment gain/ (loss) during the 

preceding year, less (2) 60% of the investment gain/ 

(loss) during the second preceding year, less (3) 40% of 

the investment gain/ (loss) during the third preceding 

year, less (4) 20% of the investment gain/ (loss) for the 

fourth preceding year. For the purpose of this 

calculation, the gain/ (loss) is defined as the difference 

between the actual and the expected return (based on 

the valuation interest rate) on the Market Value of 

Assets during the year. 

The actuarial value is taken to be the adjusted market 

value as described above, but subject to a 20% corridor 

limit around the actual market value; that is, the 

actuarial value is never greater than 120% of market 

value, not less than 80% of market value. 

2. Funding Method: Unit Credit Cost Method 

The cost method for valuation of liabilities used for this 

valuation is the Unit Credit method. This is one of a 

family of valuation methods known as an accrued 

benefits method. The chief characteristic of an accrued 

benefits method is that the funding pattern follows the 

pattern of benefit accrual. Under the Unit Credit 

actuarial cost method, the normal cost is determined as 

that portion of each participant’s benefit attributable to 

service expected to be earned in the upcoming plan 

year. The Actuarial Liability, which is determined for 

each participant as of each valuation date, represents 

the actuarial present value of the participant’s current 

accrued benefit as of the valuation date. 

One of the significant effects of this funding method is 

that, depending on the demographics of the population, 

the Unit Credit method tends to produce lower costs in 

the early years. There is a possibility that as the 

population ages, the annual cost could increase over 

time. 

Exhibit 7.10 

January 1, 2019 Actuarial Valuation Report (Checklist Item #40)

IBT436-0367
Building Material Drivers Local 

436 Pension Fund 

Actuarial Valuation Report 

as of January 1, 2018 

Produced by Cheiron 

February 2019

Exhibit 7.10 

January 1, 2018 Actuarial Valuation Report (Checklist Item #40)

IBT436-0368
TABLE OF CONTENTS

Section Page 

Transmittal Letter...................................................................................................................................................................................... i 

Foreword .................................................................................................................................................................................................. ii

Section I Summary ........................................................................................................................................................................... 1 

Section II Assets ................................................................................................................................................................................ 7 

Section III Liabilities .......................................................................................................................................................................... 9 

Section IV Costs and Contributions .................................................................................................................................................. 13 

Section V Withdrawal Liability ....................................................................................................................................................... 23 

Section VI FASB ASC Topic No. 960 Disclosures .......................................................................................................................... 25 

Appendices 

Appendix A Membership Information ................................................................................................................................................ 26 

Appendix B Summary of Major Plan Provisions ................................................................................................................................ 29 

Appendix C Actuarial Assumptions and Methods .............................................................................................................................. 34 

Exhibit 7.10 

January 1, 2018 Actuarial Valuation Report (Checklist Item #40)

IBT436-0369

BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2018 

FOREWORD 

ii

Cheiron has performed the Actuarial Valuation of the Building 

Material Drivers Local 436 Pension Fund as of January 1, 

2018. The purpose of this report is to: 

1) Measure and disclose, as of the valuation date, the 

financial condition of the Plan; 

2) Provide specific information and documentation 

required by the Federal Government and the Auditors 

of the Plan; 

3) Determine whether negotiated contributions support the 

current level of benefits and whether they fall within 

the acceptable range of contributions under the Plan for 

the 2018 plan year; and 

4) Compare assets with the value of vested benefits to 

determine allocable plan Withdrawal Liability, if any. 

An actuarial valuation establishes and analyzes plan assets, 

liabilities, and contributions on a consistent basis and traces 

their progress from one year to the next. It includes 

measurement of the Plan’s investment performance as well as 

an analysis of actuarial liability gains and losses. The valuation 

report is organized as follows: 

Section I Summary presents key valuation results and 

compares this year’s results to last year’s results. It also 

provides the historical summary and future outlook of the Plan. 

Section II Assets contains exhibits relating to the 

valuation of assets. 

Section III Liabilities shows the various measures of 

liabilities. 

Section IV Costs and contributions develop the minimum 

and maximum contributions. 

Section V Withdrawal Liability shows the development of 

the UVB (Unfunded Vested Benefits) as of January 1, 2018 

that would be allocated to employers that withdraw before 

December 31, 2018. 

Section VI FASB ASC Topic No. 960 Disclosure provides 

information required by the Plan’s Auditor. 

The appendices to this report contain a summary of the Plan’s:

 membership at the valuation date, 

 major plan provisions, and 

 actuarial methods and assumptions used in the valuation. 

In preparing our report, we relied on information (some oral 

and some written) supplied by the Plan Administrator and the 

Plan Auditor. This information includes, but is not limited to, 

the plan provisions, employee data, and financial information. 

We performed an informal examination of the obvious 

characteristics of the data for reasonableness and consistency in 

accordance with Actuarial Standards of Practice No. 23. 

The actuarial assumptions, taken individually, reflect our 

understanding and best estimate of the likely future experience 

of the Plan. Future results may differ significantly from current 

results presented in this report due to such factors as the 

following: plan experience differing from that anticipated by 

the assumptions, changes in assumptions, and changes in plan 

provisions or applicable law. 

Exhibit 7.10 

January 1, 2018 Actuarial Valuation Report (Checklist Item #40)

IBT436-0371
BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2018 

SECTION I – SUMMARY 

1 

1/1/2017 1/1/2018 Change

Participant Counts

Actives 191 179 -6.3%

Terminated Vesteds 565 548 -3.0%

In Pay Status 937 943 0.6%

Total 1,693 1,670 -1.4%

Financial Information

Market Value of Assets (MVA) $ 31,242,861 $ 30,522,845 -2.3%

Actuarial Value of Assets (AVA) 33,807,415 30,291,189 -10.4%

Present Value of Future Benefits $ 118,739,866 $ 118,238,036 -0.4%

Actuarial Liability/Present Value of Accumulated Benefits $ 116,237,429 $ 116,027,947 -0.2%

Surplus/(Unfunded) using MVA (84,994,568) (85,505,102) 0.6%

Funded Ratio using MVA 26.9% 26.3%

Surplus/(Unfunded) using AVA (82,430,014) (85,736,758) 4.0%

Funded Ratio using AVA 29.1% 26.1%

Normal Cost of Benefits Only $ 433,214 $ 405,213 -6.5%

Normal Cost plus Expenses $ 1,103,214 $ 1,075,213 -2.5%

Present Value of Vested Benefits for ASC 960 $ 115,629,369 $ 115,889,451 0.2%

Vested Benefit Surplus/(Unfunded) using MVA (84,386,508) (85,366,606) 1.2%

Vested Benefit Funded Ratio using MVA 27.0% 26.3%

Contributions, Cost, and Cash Flows

ERISA Credit Balance (beginning of year) $ (3,758,381) $ (10,641,398) 183.1%

Employer Negotiated Contributions (actual / estimated) $ 2,796,041 $ 2,337,000

Per Hour $9.19 $8.50

Employer Withdrawal Payments (actual / estimated) 2,029,222 2,031,000

Total $ 4,825,263 $ 4,368,000

Per Hour (actual / estimated ) $15.86 $15.88

Board Policy Cost $ 12,839,956 $ 12,881,262 0.3%

Per Hour Board Policy Cost $42.80 $46.84 9.4%

Prior Year Benefit Payouts $ (8,652,368) $ (8,584,109) -0.8%

Prior Year Administrative Expenses (650,624) (712,065) 9.4%

Prior Year Total Investment Income (net) 2,464,646 3,750,895

Hours(Actual/Expected) 304,304 275,000 -9.6%

Table I-1

Principal Results

Exhibit 7.10 

January 1, 2018 Actuarial Valuation Report (Checklist Item #40)

IBT436-0372
BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2018 

SECTION I – SUMMARY 

2 

Following is an analysis of the plan’s results for the prior year 

followed by statutory considerations (PPA and MPRA), historical 

results for the last ten years and projections of the future. 

Prior Year Results 

The plan’s projected insolvency is not a new finding for 2018. 

However, its financial condition has deteriorated further.

Investment and liability experience and their effect on the plan’s 

policy cost traditionally have been the focus of year-to-year 

analyses. 

 In 2017, the return on market value was 12.93%. In dollar 

terms, during 2017 the Plan had an actuarial gain of $1,717,730 

from investments. This is the amount by which investment 

returns were more than what returns would have been at the 

assumed return rate of 7.00%.

 For various purposes, including the determination of its annual 

Minimum Required Contribution (MRC), the Plan uses an 

Actuarial Value of Assets (AVA) which smoothes annual 

investment gains or losses over a period of five years. The 

Actuarial Value of Assets returned 3.02% resulting in a 

$1,257,999 actuarial loss (the difference between expected 

returns at 7.00% and the actual returns) from investments for 

MRC calculations. 

 The Plan experienced a liability loss of $69,830 for 2017. This 

came from a $690,695 gain from data corrections for inactive 

vested participants and a $760,525 loss from worse than 

expected demographic experience. 

 Combining the AVA actuarial investment loss, the liability loss, 

and also a small loss on expected administrative expenses of 

$19,666, the Plan experienced a total net actuarial loss of 

$1,347,495 for determining ERISA minimum funding 

requirements. This amount will be amortized over 15 years and 

added to future Minimum Required Contributions. 

 Using the Market Value of Assets, the funded ratio of Actuarial 

Liability decreased from 26.9 to 26.3%. The Plan has been less 

than 60% funded since 2005. 

 At the end of 2017, the Plan had a Funding Standard Account 

Funding Deficiency. Prior to the Pension Protection Act of 

2006 (PPA) this would have triggered an excise tax and would 

have been a matter of great concern. Post-PPA, Critical plans 

like this one that have adopted a Rehabilitation Plan are exempt 

from this excise tax. 

 Combining the previously mentioned liability, administrative 

expense, and market value investment experience, the Board 

Policy Cost increased from $12,839,956 to $12,881,262. On an 

hourly basis, the Board Policy Cost increased from $42.80 per 

hour to $46.84 per hour. This cost compares to expected income 

of $7.64 per hour from negotiated contributions. 

 If the Plan received an amount equal to this policy cost from 

contributions and Withdrawal Liability payments for the next 

10 years and if all underlying assumptions were met, not only 

would insolvency be avoided; the Plan would be 100% funded. 

Traditionally, this gap between income and cost would have 

been addressed through bargaining for increased contributions. 

In this case, however, it will have to be addressed through 

MPRA permitted actions including a PBGC partition or future 

legislative help. 

Despite this change in long-term objectives from 100% funding 

of liabilities to avoiding insolvency, it is still instructive to note 

the sources of change in the Board Policy Cost, particularly on 

an hourly basis. The following table shows a detailed analysis 

Exhibit 7.10 

January 1, 2018 Actuarial Valuation Report (Checklist Item #40)

IBT436-0373
BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2018 

SECTION I – SUMMARY 

3 

of the sources of the $4.65 increase in the Board Policy Cost 

since the last valuation. 

SOURCES OF CHANGE IN BOARD POLICY COST $ / Hour

A 2017 Board Policy Cost $ 12,839,955 42 800$ 

 1 Change due to more actual 2017 contribution hours: (0 605)

300,000 vs 304,304

 2 Revised 2017 Board Policy Cost 42.195$ 

 (Negatives are Good) Effect on

Unfunded Effect on Policy Cost

B Change due to: $ / Hour

 Change in Assumptions 0$ $ 0 000$ 0

 Rehabilitation Plan 0 0 0 000

 Decrease in Current Year New Benefit/Normal Cost (28,964) (0 095)

 Investment experience 12 93% vs 7 00% (1,717,730) (254,878) (0 838)

 Administrative expense experience 19,666 2,918 0 010

 Negotiated contributions shortfall 10,445,339 1,549,890 5 093

 WL and Litigation Payments 2,154,877 (319,743) (1 051)

 Liability assumptions experience 69,830 10,361 0 034

 Reset amortization period to 10 years (918,277) (3 018)

 Decrease in hours 304,304 to 275,000 4 511

 TOTALS $ 41,307 4 646$ 

C 2018 Board Policy Cost $ 12,881,262 46.841$ 

D Expected Negotiated Contributions $ 2,100,000 7 636$ 

E Expected Contributions plus Expected Withdrawal Payments $ 4,570,000 16 618$ 

 Annual benefit payments and expenses were $9,296,174, but 

contributions including Withdrawal Liability payments and a 

one-time litigation settlement payment were only $4,825,263. 

Consequently, the Plan had a negative cash flow during 2017 

without including its investment returns. 

Without compensating investment returns the Plan must have a 

positive cash flow in order to grow. Due to the large negative 

cash flow situation, the Plan is, and will continue to be, 

particularly vulnerable to investment risk. As a consequence of 

this unmanageable negative cash flow, the biggest challenge 

facing the Plan is its projected insolvency. 

Pension Protection Act 

The Pension Protection Act of 2006 added a significant layer of 

new considerations related to the Plan’s PPA Funded status. 

 The Plan has been in Critical status in every year since the 

implementation of the law except for 2008 when it was in 

Endangered status. 

 In an effort to correct the Plan’s Critical status, as required by 

the PPA, a Rehabilitation Plan was adopted by the Board of 

Trustees in November 2009. The Rehabilitation Plan included 

contribution rate increases and the removal of certain benefits 

previously provided. 

 As also required, a review and possible update to the 

Rehabilitation Plan has occurred each November. However, the 

initial Rehabilitation Plan has never been modified since the 

Board believes it has taken all reasonable measures under PPA 

that it can to forestall insolvency. 

Multiemployer Pension Reform Act of 2014 

Because the provisions of PPA were proving inadequate for 

helping severely under-funded plans address their problems the 

Multiemployer Pension Reform Act of 2014 (MPRA) was passed 

in December 2014. MPRA modified PPA. 

On March 30, 2018, the Plan was again certified to be in Critical 

and Declining status because it is Critical and is projected to be 

insolvent within 19 years. 

While controversial, unpopular, and unfortunate, the Critical and 

Declining provisions of the law permit benefit reductions and the 

partition of some liabilities to the Pension Benefit Guaranty 

Corporation. These may give plans like this one a means for 

avoiding the insolvency mentioned in the previous section. 

Exhibit 7.10 

January 1, 2018 Actuarial Valuation Report (Checklist Item #40)

IBT436-0374

 

 





BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2018 

SECTION III – LIABILITIES

9 

In this section, we present detailed information on Plan 

liabilities including:

 Disclosure of plan liabilities at January 1, 2017, and 

January 1, 2018; and 

 Statement of changes in these liabilities during the year. 

Disclosure 

Several types of liabilities are calculated and presented in this 

report. Each type is distinguished by the purpose for which it is 

used. 

 Present Value of Future Benefits: Used for analyzing the 

financial outlook of the Plan, this represents the amount of 

money needed today, to fully pay off all future benefits of 

the Plan, assuming participants continue to accrue benefits. 

 Actuarial Liabilities: Used for ensuring minimum funding 

standards are met, this liability is determined using an 

actuarial funding method to apportion the Present Value of 

Future Benefits between the past and the future. 

For this Plan that method is the Unit Credit funding 

method. The Actuarial Liability under the Unit Credit 

funding method represents the total amount of money 

needed to fully pay off all future obligations of the Plan, 

assuming no further accrual of benefits. 

This liability is required for accounting disclosures by 

FASB ASC Topic No. 960. For that purpose, it is referred 

to as the Present Value of Accumulated Benefits. In 

addition, it is required to determine the Plan’s funded ratio 

for determining its funded status under the Pension 

Protection Act of 2006. It can also be used to establish 

comparative benchmarks with other plans. 

 Vested Liabilities: This liability represents the portion of 

the Actuarial Liabilities that are vested. After removing 

certain vested benefits according to PBGC regulations and 

adding administrative expense, this liability is used to 

determine the Unfunded Vested Benefits (UVB) used in 

Withdrawal Liability assessments. 

 Current Liabilities: Used for statutory compliance 

purposes, the calculation of this liability is defined by law 

and IRS Regulations and is used to determine maximum 

allowable tax-deductible contributions. 

The table on the following page discloses each of these 

liabilities for the current valuation and the prior one. With 

respect to each disclosure, a subtraction of the appropriate 

value of Plan assets yields, for each respective type, a net 

surplus, or an unfunded liability. 

Exhibit 7.10 

January 1, 2018 Actuarial Valuation Report (Checklist Item #40)

IBT436-0380



BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2018 

SECTION IV – COSTS AND CONTRIBUTIONS 

13 

In this section, detailed information on plan costs and 

contributions is presented from two perspectives:

 The actuarially determined Board Policy Cost and 

 Statutory amounts, which could affect the above. 

Board Policy Cost 

The Board Policy Cost is based on criteria established by the 

Board of Trustees. It is determined in two parts. The first part 

is the Unit Credit Normal Cost. This is the value of the new 

future benefits accrued and expenses expected to be paid over 

the coming year. 

The second part is an amortization payment to pay off the 

Unfunded Actuarial Liability. The Unfunded Actuarial 

Liability is the difference between the Market Value of Assets 

of the Plan at the valuation date and Actuarial Liability as 

determined by the actuarial cost method. This amount is 

amortized over 10 years. 

In theory, if income from contributions and Withdrawal 

Liability payments equal to the Board Policy Cost are made for 

ten years the Plan will be completely funded. In reality, the 

expected income from contributions and withdrawal payments 

is far less than this amount and will not reduce the Unfunded 

Actuarial Liability this year. The shortfall will increase next 

year’s Board Policy Cost. 

Statutory Amounts

ERISA and the IRS tax code produce various requirements on 

the contributions made to qualified pension plans. These 

amounts impact the minimum that must be paid, the maximum 

that can be deducted, and the timing of contributions. 

To ensure that minimum contributions are met, pension plans 

are required to retain an enrolled actuary to complete Schedule 

MB to Form 5500 on an annual basis. Because the bargained 

contributions exceeded the Minimum Required Contribution in 

years past, the Plan built up a Credit Balance. However, that is 

no longer the case. The Credit Balance is being used to make 

up the difference between the Minimum Required Contribution 

and bargained contributions and withdrawal payments. 

The actuarially determined Board Policy Cost for 2018 is 

compared to the statutory amounts on the next table and to the 

expected contributions from all sources. The table also shows 

the Board Policy Cost and expected contributions per hour. 

Exhibit 7.10 

January 1, 2018 Actuarial Valuation Report (Checklist Item #40)

IBT436-0384

BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2018 

SECTION IV – COSTS AND CONTRIBUTIONS

15 

Exhibit 7.10 

January 1, 2018 Actuarial Valuation Report (Checklist Item #40)

IBT436-0386

 

 

















BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2018 

APPENDIX B – SUMMARY OF MAJOR PLAN PROVISIONS 

33 

6. Early Retirement 

a. Eligibility For benefits earned after an employer adopted the Rehabilitation Plan, eligibility is the attainment of age 62 and 

completion of 15 years of Credited Service. 

b. Amount Benefit is the actuarially reduced accrued benefit for commencement prior to Normal Retirement date. 

7. Deferred Vested Retirement 

a. Eligibility Eligibility is the completion of five years of vesting service. 

b. Amount Benefit is the normal pension actuarially reduced if payments begin prior to age 65. 

8. Pre-Retirement Surviving Spouse Benefit 

If a vested participant is eligible for pension, but dies prior to commencement of benefits, the surviving spouse is entitled to the 

benefit the spouse would have received had the participant retired with the 50% Joint and Survivor form in effect, then died. 

If a vested participant is not eligible to begin receiving pension and dies prior to commencement of benefits, the surviving spouse 

is entitled to the benefit the spouse would have received had the participant terminated employment on the date of death with 

deferred vested benefit, survived to the earliest possible eligibility date and then retired with the 50% Joint and Survivor form in 

effect, then died. 

9. Changes since Last Valuation

All employers have adopted the Rehabilitation Plan, which removed disability benefits, lump-sum death benefits, and the five-year 

certain provision of the plan’s normal form of payment. 

Exhibit 7.10 

January 1, 2018 Actuarial Valuation Report (Checklist Item #40)

IBT436-0404

BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2018 

APPENDIX C – ACTUARIAL ASSUMPTIONS AND METHODS 

35 

6. Administrative Expenses

$670,000 assumed payable at the beginning of the year. 

Five years of administrative expenses are included to 

determine the value of vested benefits when calculating 

Withdrawal Liability. 

7. Changes in Assumptions Since Last Valuation

As required, the Current Liability interest rate and 

mortality were updated. The interest rate went from 

3.05% to 2.98%.

Exhibit 7.10 

January 1, 2018 Actuarial Valuation Report (Checklist Item #40)

IBT436-0406
BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2018 

APPENDIX C – ACTUARIAL ASSUMPTIONS AND METHODS 

36 

B. Actuarial Methods 

1. Asset Valuation Method 

The valuation assets are determined as the market value 

less (1) 80% of the investment gain/ (loss) during the 

preceding year, less (2) 60% of the investment gain/ 

(loss) during the second preceding year, less (3) 40% of 

the investment gain/ (loss) during the third preceding 

year, less (4) 20% of the investment gain/ (loss) for the 

fourth preceding year. For the purpose of this 

calculation, the gain/ (loss) is defined as the difference 

between the actual and the expected return (based on 

the valuation interest rate) on the Market Value of 

Assets during the year. 

The actuarial value is taken to be the adjusted market 

value as described above, but subject to a 20% corridor 

limit around the actual market value; that is, the 

actuarial value is never greater than 120% of market 

value, not less than 80% of market value. 

2. Funding Method: Unit Credit Cost Method 

The cost method for valuation of liabilities used for this 

valuation is the Unit Credit method. This is one of a 

family of valuation methods known as an accrued 

benefits method. The chief characteristic of an accrued 

benefits method is that the funding pattern follows the 

pattern of benefit accrual. Under the Unit Credit 

actuarial cost method, the normal cost is determined as 

that portion of each participant’s benefit attributable to 

service expected to be earned in the upcoming plan 

year. The Actuarial Liability, which is determined for 

each participant as of each valuation date, represents 

the actuarial present value of the participant’s current 

accrued benefit as of the valuation date. 

One of the significant effects of this funding method is 

that, depending on the demographics of the population, 

the Unit Credit method tends to produce lower costs in 

the early years. There is a possibility that as the 

population ages, the annual cost could increase over 

time. 

Exhibit 7.10 

January 1, 2018 Actuarial Valuation Report (Checklist Item #40)

IBT436-0407
Building Material Drivers Local 

436 Pension Fund 

Actuarial Valuation Report 

as of January 1, 2017 

Produced by Cheiron 

February 2018

Exhibit 7.10 

January 1, 2017 Actuarial Valuation Report (Checklist Item #40)

IBT436-0408
TABLE OF CONTENTS

Section Page 

Transmittal Letter...................................................................................................................................................................................... i 

Foreword .................................................................................................................................................................................................. ii

Section I Summary ........................................................................................................................................................................... 2 

Section II Assets ................................................................................................................................................................................ 7 

Section III Liabilities .......................................................................................................................................................................... 9 

Section IV Costs and Contributions .................................................................................................................................................. 13 

Section V Withdrawal Liability ....................................................................................................................................................... 23 

Section VI FASB ASC Topic No. 960 Disclosures .......................................................................................................................... 25 

Appendices 

Appendix A Membership Information ................................................................................................................................................ 26 

Appendix B Summary of Major Plan Provisions ................................................................................................................................ 29 

Appendix C Actuarial Assumptions and Methods .............................................................................................................................. 34 

Exhibit 7.10 

January 1, 2017 Actuarial Valuation Report (Checklist Item #40)

IBT436-0409

BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2017 

FOREWORD 

ii

Cheiron has performed the Actuarial Valuation of the Building 

Material Drivers Local 436 Pension Fund as of January 1, 

2017. The purpose of this report is to: 

1) Measure and disclose, as of the valuation date, the 

financial condition of the Plan; 

2) Provide specific information and documentation 

required by the Federal Government and the auditors of 

the Plan; 

3) Determine whether negotiated contributions support the 

current level of benefits and whether they fall within 

the acceptable range of contributions under the Plan for 

the 2017 plan year; and 

4) Compare assets with the value of vested benefits to 

determine allocable plan Withdrawal Liability, if any. 

An Actuarial Valuation establishes and analyzes plan assets, 

liabilities, and contributions on a consistent basis and traces 

their progress from one year to the next. It includes 

measurement of the Plan’s investment performance as well as 

an analysis of actuarial liability gains and losses. The valuation 

report is organized as follows: 

Section I Summary presents key valuation results and 

compares this year’s results to last year’s results. It also 

provides the historical summary and future outlook of the Plan. 

Section II Assets contains exhibits relating to the 

valuation of assets. 

Section III Liabilities shows the various measures of 

liabilities. 

Section IV Costs and contributions develop the minimum 

and maximum contributions. 

Section V Withdrawal Liability shows the development of 

the UVB (Unfunded Vested Benefits) as of January 1, 2017 

that would be allocated to employers that withdraw before 

December 31, 2017. 

Section VI FASB ASC Topic No. 960 Disclosure provides 

information required by the Plan’s auditor.

The appendices to this report contain a summary of the Plan’s:

 membership at the valuation date, 

 major Plan provisions, and 

 actuarial methods and assumptions used in the valuation. 

In preparing our report, we relied on information (some oral 

and some written) supplied by the Plan Administrator and the 

Plan Auditor. This information includes, but is not limited to, 

the plan provisions, employee data, and financial information. 

We performed an informal examination of the obvious 

characteristics of the data for reasonableness and consistency in 

accordance with Actuarial Standards of Practice No. 23. 

The actuarial assumptions, taken individually, reflect our 

understanding and best estimate of the likely future experience 

of the Plan. The results of this report are dependent upon future 

experience conforming to these assumptions. To the extent that 

future experience deviates from the actuarial assumptions, the 

true cost of the Plan could vary from our results. 

Exhibit 7.10 

January 1, 2017 Actuarial Valuation Report (Checklist Item #40)

IBT436-0411

BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2017 

SECTION I – SUMMARY 

2 

Following is an analysis of the Plan’s results for the prior year 

followed by statutory considerations (PPA and MPRA), historical 

results for the last ten years and projections of the future. 

Prior Year Results 

The Plan’s projected insolvency is not a new finding for 2017. 

However, its financial condition has deteriorated further.

Investment and liability experience and their effect on the Plan’s 

Policy Cost traditionally have been the focus of year-to-year 

analyses. 

 In 2016, the return on market value was 8.06%. In dollar 

terms, during 2016 the Plan gained $320,653, an amount that 

was greater than what returns would have been at the assumed 

return rate of 7.00%.

 For various purposes, including the determination of its annual 

Minimum Required Contribution (MRC), the Plan uses an 

Actuarial Value of Assets (AVA) which smoothes annual 

investment gains or losses over a period of five years. The 

Actuarial Value of Assets returned 3.12% resulting in a 

$1,341,718 actuarial loss (the difference between expected 

returns at 7.00% and the actual returns) from investments for 

MRC calculations. 

 All employers have now adopted the rehabilitation plan, 

resulting in a plan change that decreased the liabilities by 

$1,022,124. 

 The Plan experienced a liability gain of $839,789 for 2016 

from better than expected demographic experience. 

 Combining the AVA actuarial investment loss, the liability 

gain, and also a gain on expected administrative expenses of 

$43,889, the Plan experienced a total net actuarial loss of 

$458,040 for determining ERISA minimum funding 

requirements. This amount will be amortized in future 

minimum funding over 15 years. 

 Using the Market Value of Assets, the funded ratio of 

Actuarial Liability decreased from 30.3% to 26.9%. The Plan 

has been less than 60% funded since 2005. 

 As explained in the Appendix a number of valuation 

assumptions were changed. These changes were made in an 

attempt to synchronize plan assumptions with those used for 

Department of Treasury approved MPRA benefit suspensions. 

They caused the funding liabilities to increase $11,884,102 and 

the liabilities for withdrawal purposes to increase slightly less 

 At the end of 2017, the Plan is projected to have a Funding 

Standard Account Funding Deficiency. Prior to the Pension 

Protection Act of 2006 (PPA) this would have triggered an 

excise tax and would have been a matter of great concern. 

Post-PPA, Critical plans like this one that have adopted a 

Rehabilitation Plan are exempt from this excise tax. 

 Combining the previously mentioned liability, administrative 

expense, and market value investment experience, the Board 

Policy Cost increased from $11,504,490 to $12,839,956 On an 

hourly basis, the Board Policy Cost increased from $32.87 per 

hour to $42.80 per hour. This cost compares to expected 

income of $9.33 per hour from negotiated contributions. 

 If the Plan received an amount equal to this Policy Cost from 

contributions and Withdrawal Liability payments for the next 

10 years and all underlying assumptions were met, not only 

would insolvency be avoided; the Plan would be 100% funded. 

Traditionally, this gap between income and cost would have 

been addressed through bargaining for increased contributions. 

In this case, however, it will have to be addressed through 

MPRA permitted benefit reductions. 

Exhibit 7.10 

January 1, 2017 Actuarial Valuation Report (Checklist Item #40)

IBT436-0413
BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2017 

SECTION I – SUMMARY 

3 

Despite this change in long-term objectives from 100% 

funding of liabilities to avoiding insolvency, it is still 

instructive to note the sources of change in the Policy Cost, 

particularly on an hourly basis. The following table shows a 

detailed analysis of the sources of the $9.93 increase in the 

Board Policy cost since the last valuation. 

Sources Of Change In Board Policy Cost $ $/ Hour

A 2016 Board Policy Cost $ 11,504,490 32 870$ 

 1 Change due to fewer 2016 contribution hours: 350,000 vs 326,219 2 396

 2 Revised 2016 Board Policy Cost $ 35.266

 (Negatives are Good) Effect on Unfunded Effect on Policy Cost

B Change due to: $ $ $/hour

 Change in Assumptions 11,884,102 1,534,961 4 705

 Rehabilitation Plan (1,022,124) 0 0 000

 Increase in Current Year New Benefit/Normal Cost (121,087) (0 371)

 Investment experience: 8 06% vs 7 00% (320,653) (47,579) (0 146)

 Administrative expense experience (43,889) (6,512) (0 020)

 Negotiated contributions shortfall 9,037,166 1,340,943 4 111

 WL and Litigation Payments 2,995,736 (444,510) (1 363)

 Liability assumptions experience (839,789) (124,609) (0 382)

 Reset amortization period to 10 years (796,143) (2 441)

 Decrease in hours: from 326,219 to 300,000 3 440

 TOTALS $ 1,335,465 7 534$ 

C 2017 Board Policy Cost $ 12,839,955 42.80$ 

D Expected Negotiated Contributions $ 2,800,000 9 33$ 

E Expected Contributions plus Expected Withdrawal Payments $ 5,270,000 17 57$ 

 Annual benefit payments and expenses were $9,302,992, but 

contributions including Withdrawal Liability payments and a 

one-time litigation settlement payment were only $5,664,019 

Consequently, the Plan had a negative cash flow during 2016 

without including its investment returns. 

Without compensating investment returns the Plan must have a 

positive cash flow in order to grow. Due to the large negative 

cash flow situation, the Plan is, and will continue to be, 

particularly vulnerable to investment risk. As a consequence of 

this unmanageable negative cash flow, the biggest challenge 

facing the Plan is its projected insolvency. 

Pension Protection Act 

The Pension Protection Act of 2006 added a significant layer of 

new considerations related to the Plan’s PPA Funded status. 

 The Plan has been in Critical status in every year since the 

implementation of the law except for 2008 when it was in 

Endangered status. 

 In an effort to correct the Plan’s Critical status, as required by 

the PPA, a rehabilitation plan was adopted by the Board of 

Trustees in November 2009. The rehabilitation plan included 

contribution rate increases and the removal of certain benefits 

previously provided. 

 As also required, a review and possible update to the 

Rehabilitation Plan has occurred each November. However, 

the initial Rehabilitation Plan has never been modified since 

the Board believes it has taken all reasonable measures under 

PPA that it can to forestall insolvency. 

Multiemployer Pension Reform Act of 2014 

Because the provisions of PPA were proving inadequate for 

helping severely under-funded plans address their problems the 

Multiemployer Pension Reform Act of 2014 (MPRA) was passed 

in December 2014. MPRA modified PPA. 

On March 30, 2017, the Plan was again certified to be in Critical

and Declining status because it is Critical and is projected to be 

insolvent within 19 years. 

While controversial, unpopular, and unfortunate, the Critical and 

Declining provisions of the law permit benefit reductions and the 

partition of some liabilities to the Pension Benefit Guaranty 

Corporation. These may give plans like this one a means for 

avoiding the insolvency mentioned in the previous section. 

Exhibit 7.10 

January 1, 2017 Actuarial Valuation Report (Checklist Item #40)

IBT436-0414





BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND

ACTUARIAL VALUATION AS OF JANUARY 1, 2017 

SECTION III – LIABILITIES

9 

In this section, we present detailed information on Plan 

liabilities including:

 Disclosure of plan liabilities at January 1, 2016, and 

January 1, 2017; and 

 Statement of changes in these liabilities during the year. 

Disclosure 

Several types of liabilities are calculated and presented in this 

report. Each type is distinguished by the purpose for which it is 

used. 

 Present Value of Future Benefits: Used for analyzing the 

financial outlook of the Plan, this represents the amount of 

money needed today, to fully pay off all future benefits of 

the Plan, assuming participants continue to accrue benefits. 

 Actuarial Liabilities: Used for ensuring minimum funding 

standards are met, this liability is determined using an 

actuarial funding method to apportion the Present Value of 

Future Benefits between the past and the future. 

For this Plan that method is the Unit Credit funding 

method. The actuarial liability under the Unit Credit 

funding method represents the total amount of money 

needed to fully pay off all future obligations of the Plan, 

assuming no further accrual of benefits. 

This liability is required for accounting disclosures by 

FASB ASC Topic No. 960. For that purpose, it is referred 

to as the Present Value of Accumulated Benefits. In 

addition, it is required to determine the Plan’s funded ratio 

for determining its funded status under the Pension 

Protection Act of 2006. It can also be used to establish 

comparative benchmarks with other plans. 

 Vested Liabilities: This liability represents the portion of 

the actuarial liabilities that are vested. After removing 

certain vested benefits according to PBGC regulations and 

adding administrative expense, this liability is used to 

determine the Unfunded Vested Benefits (UVB) used in 

Withdrawal Liability assessments.

 Current Liabilities: Used for statutory compliance 

purposes, the calculation of this liability is defined by law 

and IRS Regulations and is used to determine maximum 

allowable tax-deductible contributions. 

The table on the following page discloses each of these 

liabilities for the current valuation and the prior one. With 

respect to each disclosure, a subtraction of the appropriate 

value of Plan assets yields, for each respective type, a net 

surplus, or an unfunded liability. 

Exhibit 7.10 

January 1, 2017 Actuarial Valuation Report (Checklist Item #40)

IBT436-0420


BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND

ACTUARIAL VALUATION AS OF JANUARY 1, 2017 

SECTION III – LIABILITIES

12 

Changes in Liabilities 

Each of the liabilities shown in the prior table is subject to change at successive valuations as the experience of the Plan varies from 

that assumed in the valuation. The liabilities may change for any of several reasons, including: 

 Plan amendments 

 Interest on actuarial liabilities 

 Benefits paid to retirees 

 Participants leaving employment at rates different from 

expected 

 Changes in actuarial assumptions 

 New hires since the last valuation 

 Benefits accrued since the last valuation 

 Changes in actuarial methods 

 Corrections to participant data records 

The mortality assumption was updated to reflect a more recent 

table. 

Exhibit 7.10 

January 1, 2017 Actuarial Valuation Report (Checklist Item #40)

IBT436-0423
BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2017 

SECTION IV – COSTS AND CONTRIBUTIONS 

13 

In this section, detailed information on plan costs and 

contributions is presented from two perspectives:

 The actuarially determined Board Policy Cost and 

 Statutory amounts, which could affect the above. 

Board Policy Cost 

The Board Policy Cost is based on criteria established by the 

Board of Trustees. It is determined in two parts. The first part 

is the Unit Credit normal cost. This is the value of the new 

future benefits accrued and expenses expected to be paid over 

the coming year. 

The second part is an amortization payment to pay off the 

Unfunded Actuarial Liability. The Unfunded Actuarial 

Liability is the difference between the Market Value of Assets 

of the Plan at the valuation date and Actuarial Liability as 

determined by the actuarial cost method. This amount is 

amortized over 10 years. 

In theory, if income from contributions and Withdrawal 

Liability payments equal to the Policy Cost are made for ten 

years the Plan will be completely funded. In reality, the 

expected income from contributions and withdrawal payments 

is far less than this amount and will not reduce the Unfunded 

Actuarial Liability this year. The shortfall will increase next 

year’s Policy Cost. 

Statutory Amounts

ERISA and the IRS tax code produce various requirements on 

the contributions made to qualified pension plans. These 

amounts impact the minimum that must be paid, the maximum 

that can be deducted, and the timing of contributions. 

To ensure that minimum contributions are met, pension plans 

are required to retain an enrolled actuary to complete Schedule 

MB to Form 5500 on an annual basis. Because the bargained 

contributions exceeded the Minimum Required Contribution in 

years past, the Plan built up a credit balance. However, that is 

no longer the case. The credit balance is being used to make up 

the difference between the Minimum Required Contribution 

and bargained contributions and withdrawal payments. 

The actuarially determined Board Policy Cost for 2017 is 

compared to the statutory amounts on the next table and to the 

expected contributions from all sources. The table also shows 

the Board Policy Cost and expected contributions per hour. 

Exhibit 7.10 

January 1, 2017 Actuarial Valuation Report (Checklist Item #40)

IBT436-0424
BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND

ACTUARIAL VALUATION AS OF JANUARY 1, 2017 

SECTION IV – COSTS AND CONTRIBUTIONS

14 

The tables on the following pages show the IRS Funding Standard Account as well as development of the minimum required and 

maximum deductible contributions for 2017 and other supporting information. 

Exhibit 7.10 

January 1, 2017 Actuarial Valuation Report (Checklist Item #40)

IBT436-0425

 
BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND

ACTUARIAL VALUATION AS OF JANUARY 1, 2017 

SECTION IV – COSTS AND CONTRIBUTIONS

15 

Exhibit 7.10 

January 1, 2017 Actuarial Valuation Report (Checklist Item #40)

IBT436-0426


BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND

ACTUARIAL VALUATION AS OF JANUARY 1, 2017 

SECTION IV – COSTS AND CONTRIBUTIONS

18 

Exhibit 7.10 

January 1, 2017 Actuarial Valuation Report (Checklist Item #40)

IBT436-0429
BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND

ACTUARIAL VALUATION AS OF JANUARY 1, 2017 

SECTION IV – COSTS AND CONTRIBUTIONS

19 

Exhibit 7.10 

January 1, 2017 Actuarial Valuation Report (Checklist Item #40)

IBT436-0430
BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND

ACTUARIAL VALUATION AS OF JANUARY 1, 2017 

SECTION IV – COSTS AND CONTRIBUTIONS

20 

Exhibit 7.10 

January 1, 2017 Actuarial Valuation Report (Checklist Item #40)

IBT436-0431












BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2017 

APPENDIX B – SUMMARY OF MAJOR PLAN PROVISIONS 

33 

6. Early Retirement 

a. Eligibility For benefits earned after an employer adopted the rehabilitation plan, eligibility is the attainment of age 62 and 

completion of 15 years of credited service. 

b. Amount Benefit is the actuarially reduced accrued benefit for commencement prior to normal retirement date. 

7. Deferred Vested Retirement 

a. Eligibility Eligibility is the completion of five years of vesting service. 

b. Amount Benefit is the normal pension actuarially reduced if payments begin prior to age 65. 

8. Pre-Retirement Surviving Spouse Benefit 

If a vested participant is eligible for pension, but dies prior to commencement of benefits, the surviving spouse is entitled to the 

benefit the spouse would have received had the participant retired with the 50% Joint and Survivor form in effect, then died. 

If a vested participant is not eligible to begin receiving pension and dies prior to commencement of benefits, the surviving spouse 

is entitled to the benefit the spouse would have received had the participant terminated employment on the date of death with 

deferred vested benefit, survived to the earliest possible eligibility date and then retired with the 50% Joint and Survivor form in 

effect, then died. 

9. Changes since Last Valuation

All employers have adopted the rehabilitation plan, which removed disability benefits, lump-sum death benefits, and the five-year 

certain provision of the Plan’s normal form of payment. 

Exhibit 7.10 

January 1, 2017 Actuarial Valuation Report (Checklist Item #40)

IBT436-0444

BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2017 

APPENDIX C – ACTUARIAL ASSUMPTIONS AND METHODS 

35 

6. Administrative Expenses

$670,000 assumed payable at the beginning of the year. 

Five years of administrative expenses are included to 

determine the value of vested benefits when calculating 

Withdrawal Liability. 

7. Changes in Assumptions Since Last Valuation

As required, the current liability interest rate and 

mortality were updated. The interest rate went from 

3.28% to 3.05%.

Disability rates were removed as a separate decrement 

because the Plan no longer provides disability benefits. 

They were added to the prior termination rates. 

For funding purposes the following assumptions were 

changed. These changes were made in an attempt to 

have plan assumptions mirror those that have been used 

for MPRA benefit suspensions that have been approved 

by the Department of Treasury. 

 Vested terminated participants are assumed to 

begin benefits at age 62 (or current age if 

greater) rather than age 65. 

 Mortality for healthy participants was changed 

to follow RP-2014 adjusted to 2006 Blue Collar 

Mortality, projected using the MP-2016 

improvement scale with base year 2006 and 

generational mortality improvements. 

 Mortality for disabled participants was changed 

to follow RP-2014 Disabled Retiree Mortality, 

projected using the MP-2014 improvement scale 

with base year 2014 and generational mortality 

improvements. 

Exhibit 7.10 

January 1, 2017 Actuarial Valuation Report (Checklist Item #40)

IBT436-0446
BUILDING MATERIAL DRIVERS LOCAL 436 PENSION FUND 

ACTUARIAL VALUATION AS OF JANUARY 1, 2017 

APPENDIX C – ACTUARIAL ASSUMPTIONS AND METHODS 

36 

B. Actuarial Methods 

1. Asset Valuation Method 

The valuation assets are determined as the market value 

less (1) 80% of the investment gain/ (loss) during the 

preceding year, less (2) 60% of the investment gain/ 

(loss) during the second preceding year, less (3) 40% of 

the investment gain/ (loss) during the third preceding 

year, less (4) 20% of the investment gain/ (loss) for the 

fourth preceding year. However, the 2008 investment 

loss is recognized at a rate of 10% per plan year due to 

PRA 2010 Funding Relief. For the purpose of this 

calculation, the gain/ (loss) is defined as the difference 

between the actual and the expected return (based on 

the valuation interest rate) on the Market Value of 

Assets during the year. 

The actuarial value is taken to be the adjusted market 

value as described above, but subject to a 20% corridor 

limit around the actual market value; that is, the 

actuarial value is never greater than 120% of market 

value, not less than 80% of market value. 

2. Funding Method: Unit Credit Cost Method 

The cost method for valuation of liabilities used for this 

valuation is the Unit Credit method. This is one of a 

family of valuation methods known as an accrued 

benefits method. The chief characteristic of an accrued 

benefits method is that the funding pattern follows the 

pattern of benefit accrual. Under the Unit Credit 

actuarial cost method, the normal cost is determined as 

that portion of each participant’s benefit attributable to 

service expected to be earned in the upcoming plan 

year. The actuarial liability, which is determined for 

each participant as of each valuation date, represents 

the actuarial present value of the participant’s current 

accrued benefit as of the valuation date. 

One of the significant effects of this funding method is 

that, depending on the demographics of the population, 

the Unit Credit method tends to produce lower costs in 

the early years. There is a possibility that as the 

population ages, the annual cost could increase over 

time. 

3. Pension Relief Act of 2010 Funding Relief 

The Plan’s Board of Trustees elected funding relief 

under §431(b)(8) of the Internal Revenue Code 

commencing with the 2009 plan year, specifically: 

 The “special asset valuation rule” in determining 

the actuarial value of plan assets which allows the 

Plan to recognize the 2008 loss over 10 years, at 

10% per year. Prior to the relief, the 2008 would 

have been recognized over five years, or 20% per 

year. 

Exhibit 7.10 

January 1, 2017 Actuarial Valuation Report (Checklist Item #40)

IBT436-0447