Understanding the Annual Funding Notice

Defined benefit plans are designed to provide plan participants with a benefit at retirement based on the Plan’s formula.  In order to help ensure sufficient funds exist to pay for these future retirement benefits, contributions are made into a trust fund and that money is set aside for plan benefits and invested based on established investment guidelines.  The Plan’s funding policy and investment policy are outlined in the attached Notice.  Federal guidelines and reviews made by outside actuaries who look at both how much is in the trust (assets) and future obligations for benefits (liabilities) can impact the timing and amount of contributions. 

The asset and liability measures used by our outside actuaries to determine annual minimum required contributions to the Plan for 2006, 2007, and 2008 are summarized in the “Funding Target Attainment Percentage” and “Transition Data” on pages 1 and 2 of the Notice.  These values are as of September 1 of the respective year. 

On page 2 of the Notice, you’ll see the “Fair Market Value of Assets” section.  This section shows plan assets and estimated liabilities as of August 31, 2009.  This is a different measure of the Plan’s financial status.  As you can see, the value of the Plan’s assets relative to its liabilities declined during the 2008/2009 plan year.  This decline in assets was due largely to the investment loss our trust experienced during the second half of 2008 and first quarter of 2009.  Our actuaries are preparing the annual actuarial valuation.  The actuarial valuation will include a more precise measure of the liabilities.

Full Issue: No. 191 - December 21, 2009

Back to CSI Pension Updates