Masonry Magazine September 1962 Page. 11
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Because the plan must be designed to not only current benefits but also future benefits, it is necessary to accumulate a fund in advance to offset the developing liabilities. Chart 2 illustrates the relationship of benefits, employer contributions to the fund, investment income, and expenses of operating the plan.
There is a tendency to think of the employer's contribution as being the employee's money. This is because the contribution is often agreed to with the idea that it is in lieu of a cash wage increase. The employers may therefore believe they have no direct interest in the operation of the pension plan. Nothing can be further from the truth. If the plan is established on an unsound basis there will eventually have to be a correction which will require a reduction in benefits or greater employer contributions. Either way the employers will undoubtedly be faced with the financial responsibility for poor judgment allowed in setting up the plan.
From the employer's point of view it is desirable to start out with the most conservative plan and then be in a position to liberalize it within the negotiated contribution rate as favorable experience comes in. From the union's point of view the goal is often to start out with the highest possible plan with the idea that any optimistic estimates can be adjusted through later negotiations. Under these conditions there is usually a basic conflict and it is up to the groups to resolve the question. Since so many unknown factors are involved in developing initial estimates for supportable benefits within the negotiated contribution rate I believe a conservative approach is in the best interests of the various parties.
In the development of benefits there is often the feeling that a fixed amount per hour, say, will produce the same benefits for all groups, i.e., if local union A has a 10¢ per hour contribution and benefits of $2.00 per month for each year of credited service, then local union B can with the same 10¢ per hour provide $2.00 per month benefit for each year of service for the employees under its jurisdiction. This simplified approach will usually not work. There may be substantial differences in the composition of the groups. For example, one group has to be looked upon as a separate problem and the supportable benefits must be based on the specific factors affecting that group.
Step 4-Discussion of Plan with Employees
Once the exact benefits of the plan have been developed it is a good idea to secure acceptance from the employees. In some cases this is mandatory-where the union trustees are acting under instructions from the union membership. Obviously the plan will be well received if the employees generally approve of it beforehand. It must be recognized though that not each and every employee will approve the plan. For example older employees might feel that not enough emphasis is given to past service. Younger employees might feel that not enough emphasis is given to future service. Nevertheless the plan should be devised to satisfy most of the employees. Otherwise it will not be completely successful.
Step 5-Selection of Insurance Co. or Bank Trustees
The most vital question is whether the plan should be insured, self-administered through a bank trustee, or a combination between an insurance company and a bank trustee. After determining the method of handling the funds there is the question of selection the particular insurance company or bank trustee. The fun really begins with Step 5.
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P. O. Box 306, Des Plaines, Illinois
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