Fair Market Value of Assets

Asset values in the chart above are actuarial values, not market values.  Market values tend to show a clearer picture of a plan’s funded status as of a given point in time.  However, because market values can fluctuate daily based on factors in the marketplace, such as changes in the stock market, pension law allows plans to use actuarial values for funding purposes.  While actuarial values fluctuate less than market values, they are estimates.  As of December 31, 2009, the estimated fair market value of the Plan’s assets was $919,003,409. As of December 31, 2008, the fair market value of the Plan’s assets was $788,635,181.  As of December 31, 2007, the fair market value of the Plan’s assets was $1,073,237,868.

Participant Information

The total number of participants in the Plan as of the Plan’s valuation date was 10,827.  Of this number, 5,186 were active participants, 4,696 were retired or separated from service and receiving benefits, and 945 were retired or separated from service and entitled to future benefits.

Funding & Investment Policies

The law requires that every pension plan have a procedure for establishing a funding policy to carry out the plan objectives.  A funding policy relates to the level of contributions needed to pay for benefits promised under the plan currently and over the years.  The Plan is funded by contributions made by employers pursuant to collective bargaining agreements with Pipe Fitters’ Association, Local Union 597, which represents the Plan’s participants.

Once money is contributed to the Plan, the money is invested by plan officials called fiduciaries.  Specific investments are made in accordance with the Plan’s investment policy.  Generally speaking, an investment policy is a written statement that provides the fiduciaries who are responsible for plan investments with guidelines or general instructions concerning various types or categories of investment management decisions.  The investment policy of the Plan is designed to guide the activities necessary to maintain compliance with the policies and guidelines approved by the Plan’s fiduciaries.  The following table summarizes the asset allocation policy targets and ranges that have been adopted for the Plan: 

Policy Allocation and Ranges

* The allocation to cash is included in the fixed income portion of the asset allocation policy. 

The investment objective of the Fund is to approximate the return of a weighted benchmark of appropriate market indices based on the Funds’ asset allocation policy.  Investment performance for each manager/product is analyzed within each asset class relative to an appropriate market index benchmark and a broad universe of managers. 

In accordance with the Plan’s investment policy, the Plan’s assets were allocated among the following categories of investments, as of the end of the Plan Year.  These allocations are percentages of total assets:

 For information about the Plan’s investment in any of the following types of investments as described in the chart above – common/collective trusts, pooled separate accounts, master trust investment accounts, or 103-12 investment entities – contact Mr. Peter Driscoll at the Fund Office.

Critical or Endangered Status

Under federal pension law, a plan generally will be considered to be in "endangered" status if, at the beginning of the plan year, the funded percentage of the plan is less than 80 percent or in "critical" status if the percentage is less than 65 percent (other factors may also apply).  If a pension plan enters endangered status, the trustees of the plan are required to adopt a funding improvement plan.  Similarly, if a pension plan enters critical status, the trustees of the plan are required to adopt a rehabilitation plan. 

Rehabilitation and funding improvement plans establish steps and benchmarks for pension plans to improve their funding status over a specified period of time.

The Plan was not in endangered or critical status in the Plan Year ending December 31, 2009. Instead, the Trustees made an election under Section 204 of the Worker, Retiree and Employer Recovery Act of 2008 to “freeze” its status for the 2009 Plan year at its 2008 status, thereby suspending the requirement that the Trustees adopt a funding improvement plan in 2009.  Absent the freeze, the Fund would have been in endangered status in the Plan Year because the funded percentage was less than 80 percent.

 Events with Material Effect on Assets or Liabilities

Federal law requires Trustees to provide in this notice a written explanation of events that are known as of December 31, 2009, which take effect in the current plan year, that are expected to have a material effect on plan liabilities or assets.  For the Plan Year beginning on January 1, 2010 and ending on December 31, 2010, the following events may have a material effect: 1) the possible negotiation of additional pension contributions effective June 1, 2010 and 2) the potential merger with the Local 422 Pension Plan. 

Right to Request a Copy of the Annual Report

A pension plan is required to file an annual report (i.e., Form 5500) containing financial and other information about the plan with the US Department of Labor.  Copies of the annual report are available from the US Department of Labor, Employee Benefits Security Administration’s Public Disclosure Room at 200 Constitution Avenue, NW, Room N-1513, Washington, DC  20210, or by calling (202) 693-8673. You may also obtain a copy of the Plan’s annual report by making a written request to the Fund Office.

Summary of Rules Governing Plans in Reorganization and Insolvent Plans

Federal law has a number of special rules that apply to financially troubled multiemployer plans.  Under so-called “plan reorganization rules,” a plan with adverse financial experience may need to increase required contributions and may, under certain circumstances, reduce benefits that are not eligible for the PBGC’s guarantee (generally, benefits that have been in effect for less than 60 months).  If a plan is in reorganization status, it must provide notification that the plan is in reorganization status and that, if contributions are not increased, accrued benefits under the plan may be reduced or an excise tax may be imposed (or both).  The law requires the plan to furnish this notification to each contributing employer and the labor organization.

Despite the special plan reorganization rules, a plan in reorganization could, nevertheless, become insolvent.  A plan is insolvent for a plan year if its available financial resources are not sufficient to pay benefits when due for the plan year.  An insolvent plan must reduce benefit payments to the highest level that can be paid from the plan’s available financial resources.  If such resources are not enough to pay benefits at a level specified by law (see Benefit Payments Guaranteed by the PBGC, below), the plan must apply to the PBGC for financial assistance.  The PBGC, by law, will loan the plan the amount necessary to pay benefits at the guaranteed level.  Reduced benefits may be restored if the plan’s financial condition improves.

A plan that becomes insolvent must provide prompt notification of the insolvency to participants and beneficiaries, contributing employers, labor unions representing participants, and the PBGC.  In addition, participants and beneficiaries also must receive information regarding whether, and how, their benefits will be reduced or affected as a result of the insolvency, including loss of a lump sum option.  This information will be provided for each year the plan is insolvent.

Benefit Payments Guaranteed by the PBGC

The maximum benefit that the PBGC guarantees is set by law.  Only vested benefits are guaranteed.  Specifically, the PBGC guarantees a monthly benefit payment equal to 100 percent of the first $11 of the Plan’s monthly benefit accrual rate, plus 75 percent of the next $33 of the accrual rate, times each year of credited service.  The PBGC’s maximum guarantee, therefore, is $35.75 per month times a participant’s years of credited service.

Example:  John earned one pension credit per year during a ten-year period. John’s 10 pension credits are valued at $76 per credit for an accrued benefit of 10 credits x $76 per credit = $760 per month.  The PBGC maximum guarantee is based on an accrual rate of $35.75.  As a result, the PBGC maximum guarantee applied to John’s benefit is 10 credits x $35.75 per credit = $357.50 per month.

The PBGC guarantees pension benefits payable at normal retirement age and some early retirement benefits.  In calculating a person’s monthly payment, the PBGC will disregard any benefit increases that were made under the plan within 60 months before the earlier of the plan’s termination or insolvency (or benefits that were in effect for less than 60 months at the time of termination or insolvency).  Similarly, the PBGC does not guarantee pre-retirement death benefits to a spouse or beneficiary (e.g., a qualified pre-retirement survivor annuity) if the participant dies after the plan terminates, benefits above the normal retirement benefit, disability benefits not in pay status, or non-pension benefits, such as health insurance, life insurance, death benefits, vacation pay, or severance pay.

Where to Get More Information

For more information about this notice, you may contact the individual below. 

Mr. Peter A. Driscoll
Pipe Fitters’ Retirement Fund Local 597
45 North Ogden Avenue
Chicago, IL  60607
(312) 633-0597 

For identification purposes, the official plan number is 001 and the plan sponsor’s employer identification number or “EIN” is 62-6105084.  For more information about the PBGC and benefit guarantees, go to the PBGC’s website, www.pbgc.gov, or call the PBGC toll-free at 1-800-400-7242 (TTY /TDD users may call the Federal relay service toll free at 1-800-877-8339 and ask to be connected to 1-800-400-7242).