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January 16, 2009

Stretched funding rules give pension plans a much-needed break

Most building trades pension plans are healthy, but negative numbers lurk

Topped out C.S. Mott Hospital replacement 'right on schedule'

'Devastating' outlook for U.S. construction without stimulus

Job losses explode in final quarter of 2008

A few simple truths to guide the way…

News Briefs


Stretched funding rules give pension plans a much-needed break

Christmas for the nation's pension plans came a little early last year, as President Bush on Dec. 23 signed legislation that is expected to provide some relief for single- and multi-employer retirement plans.

Union leaders pleaded with Congress late last year to change the Pension Protection Act of 2006, which required that pension plans falling below certain funding levels bump up employer contributions or impose cutbacks on worker benefits until a healthy funding level - generally 80 percent - is achieved.

The new bill gives multi-employer plans 13 years - instead of 10 years, which had been the rule - to achieve those higher funding levels, if needed. It is hoped that the longer period of time will allow the stock market to bounce back and improve returns, and for worker hours to increase in order to help the financial conditions of the pension funds.

The plan approved by Bush and passed by the House and Senate also allows multi-employer plans to choose to freeze the financial zone that they are in - Green, Yellow or Red - for one year. All building trades union plans fall under the "multi-employer" label.

Building and Construction Trades Department President Mark Ayers said in a letter to union affiliates that the law would provide "funding relief for the vast majority of building trades' multi-employer plans...which, like most pension plans, have been devastated by the decline in the stock markets."

The legislation gives plans "a little more time to weather the economic storm," said Karen Lapsevic, Associated General Contractors' director for tax, fiscal affairs and infrastructure finance, to the Engineering News Record.

The new law also says that people 70-1/2 years old or older will not have to take distributions from their retirement plans as required under current law, allowing them to keep savings intact for a year longer and avoid a tax hit from the lousy stock market. (Consult your tax advisor on that issue).


Most building trades pension plans are healthy, but negative numbers lurk

A survey released in December on the financial status of multi-employer pension plans - such as those that cover building trades unions - finds an increasing number of patients on the sick list, but an overall healthy population.

The survey found that 80 percent of all surveyed plans are in the "Green Zone," meaning they are more than 80 percent funded. Also revealed by the survey: 12 percent of plans are in the "Yellow Zone" for funding (less than 80 percent funded or a projected funding deficit within seven years). And, 8 percent of multi-employer plans are in the "Critical/Red Zone," with less than 65 percent funding and either a projected funding deficiency within five years or a projected inability to pay benefits within seven years.

However: the survey did not take into account the affect of this fall's market losses. "The market downturn," the Segal survey said, "which has been more dramatic following the period (as late as September) when all the certifications for plans were due, is expected to continue to have a negative impact on future survey results…."

The Segal survey combined both calendar year plans (January through December) and non-calendar-year plans (e.g. June through June). Compared to the last available calendar report at the end of 2007, the "Green Zone" plans had dropped from an 83 percent funded level.

In other findings:

  • The survey did not break down the plans by specific international union, but by general industry. Construction fared relatively well: 81 percent of union plans are in the Green Zone, with 13 percent in the Yellow Zone and 6 percent in the Red. Transportation (71 percent of plans were in the Green Zone), and Service (63 percent of plans in the Green Zone) were in worse shape.
  • The Entertainment category for multi-employer plans were in the best shape: 100 percent of plans were in the Green Zone.
  • Even without taking into account the dramatic market downturn of late 2008, the survey data indicates that, over the next two years, 10 percent of green-zone plans may migrate into the yellow zone unless additional actions are taken (up from 7 percent in the survey of only calendar-year plans).
  • As we reported last month, those "additional actions" were laid out in a letter to Congress by the Multi-Employer Pension Plan Coalition, which includes building trades unions, employers and business groups. Members of the coalition were seeking more time for pension funds to improve their funding position through hoped-for improvements in the stock market and construction man-hours worked. (They received some more time - see the front page article).

    In 2006, Congress adopted the Pension Protection Act, which was designed to improve the health of pension plans by introducing benchmarks - and penalties if they are not met during given time limits- in order to improve the solvency of the plans.


    Topped out C.S. Mott Hospital replacement 'right on schedule'

    By Marty Mulcahy
    Managing Editor

    ANN ARBOR - The structural steel's up at the massive C.S. Mott Children's and Women's Hospital Replacement Project, but it's only the first major milestone that can be marked as "finished" in the process of completing one of the largest construction projects in Michigan.

    The 13-month-long operation of installing 13,000 tons of structural steel on 13 levels "was a great job for us," said Garth Gruno, general foreman for the project's steel erector, Midwest Steel. "Aside from a couple scratches, we had a flawless safety record. You couldn't ask for a better group of guys."

    With the university on holiday hiatus, a brief topping out ceremony was held Dec. 30.

    A similarly good assessment about the iron work and the overall project came from Operations Manager Gary Simmons of construction manager Barton-Malow. "We're right on schedule, right where we want to be," he said. "Our subcontractors and the trades are doing extremely well."

    The hospital has a price tag of $754 million. Simmons said there are currently about 160 Hardhats on the job, which should increase to about 550 at peak employment.

    The 1.1 million square-foot facility will span the length of two football fields. It consists of two conjoined towers - a nine-story clinic tower and a 12-story tower devoted to inpatient care. Patient growth has prompted the expansion: A total of 3,845 babies were born in the U-M Women's Hospital birthing center in fiscal year 2007, compared with about 800 in 1969.

    According to the U-M Health Systems, the existing C.S. Mott Children's Hospital (built in 1969) and the University of Michigan's Women's Hospital (1950) are being supplanted by "a new and larger home for specialty services for newborns, children and pregnant women," - not offered anywhere else in Michigan. Also included are: a pediatric liver transplant program; a Level I pediatric trauma program; a pediatric and adolescent home ventilator program; the Craniofacial Anomalies Program; high-risk pregnancy services and specialty gynecological services.

    Construction will enhance inpatient and outpatient services within the current Mott Hospital, the Michigan Congenital Heart Center, the Birth Center and the Holden Neonatal Intensive Care Unit.

    The facility also will be home to numerous pediatric specialty clinics within the U-M Department of Pediatrics and Communicable Diseases as well as Psychology, Autism and Orthopaedics. There will be an area for both adult and pediatric bone marrow transplant patients. A helipad on top of the 12-story tower will include an elevator with direct access to the pediatric emergency center.

    When the project is complete in the fall of 2012, the existing facility will be used to benefit the entire health U-M system. The space will be used for additional faculty offices, clinic facilities and family space.

    "The next four years are going to bring dust and noise and a small bit of chaos to this corner of our campus," said U-M President Mary Sue Coleman at the project's groundbreaking. "But we need to look past the construction cranes and yellow tape that is coming and see what is really unfolding - and that is the future. The new Mott Children's Hospital and Women's Hospital will be a source of hope and a place of healing."

    The yellow tape, noise and the two tower cranes aren't going away anytime soon, although more of Midwest Steel's iron worker staff will be in the next few weeks. Gruno led the steel erection portion of the job along with Midwest Steel Project Manager Jason Moss, Sr. Project Manager Jeff Curley and Superintendent Mike LeBlanc. "We will button things up here and there, and mostly be done in a couple of months," Gruno said.

    The trickiest part of the job, Gruno said, was putting up a 150-foot clear-span truss over the building's loading dock, supporting the second, third and fourth floors. "There were a lot of intricate areas in the building," he said.

    Simmons said the biggest challenge so far has been getting materials into the site - especially structural steel - at the right time in the right order. "It's an extremely tight site," he said. "With a lot of materials, we're working just in time, so it has to come off the truck and into the building. Sequencing is very important."

    One of the now-completed goals was to get the building topped-out before the end of 2008. "We did that," Simmons said. "That one of a lot of good things going on around here this year."

    THE FIRST OF THE FINAL TWO IRON beams is lowered into place on Dec. 30 during the topping out of the C.S. Mott Children's and Women's Hospital Replacement Project on the University of Michigan campus in Ann Arbor. About 13,000 tons of steel went into the hospital's two towers, in an effort led by Midwest Steel. Constructed on land that had been a parking lot, the new hospital building is one of the biggest construction project currently going on in Michigan.

    WORKING WITH CONDUIT at the Mott Hospital project are Matt Kalmbach and Brad Seager of IBEW Local 252 and Shaw Electric.

    THE REMAINING CREW of Iron Workers Local 25 members at the C.S. Mott Hospital Replacement Project stand in front of the two beams used in the topping out.


    'Devastating' outlook for U.S. construction without stimulus

    By Marty Mulcahy
    Managing Editor

    If the current dismal work prospects in the U.S. come to fruition, it would be "simply devastating" to the U.S. construction industry, with job layoffs amounting to nearly one-third of U.S. building trades workers.

    So said Stephen Sandherr, CEO of the Associated General Contractors of America at a Jan. 8 news conference. He said a nationwide survey of 33,000 construction contractors "paint a picture for 2009 that makes 2008 look good by comparison."

    He said 30 percent of the nation's construction workforce "could be dismissed this year" if current trends don't change. Sandherr said there were about 7.8 million workers in the U.S. construction industry in 2000, and today that number has dropped by 10 percent, or 780,000 workers. Ninety-two percent of building contractors and 93 percent of road builders are expecting or are experiencing declining activity, he added.

    The saving grace, said Sandherr and a host of AGC contractors from around the country, would be the economic stimulus program put forth by the incoming Obama Administration, including investment in roads, schools public buildings and green construction.

    The same day as the news conference, President-elect Obama laid out his financial stimulus plan. It didn't have exact numbers or layout specific uses for the money, but there's speculation that it could involve spending in the neighborhood of $800 billion, and up to $1 trillion.

    Obama warned of unemployment rates exceeding 10 percent, and ominously, a "generation" of lost earnings if Congress doesn't approve his stimulus plan shortly after he takes office. He said failure to pass the plan would make "a bad situation …dramatically worse."

    Called the "American Recovery and Reinvestment Plan," Obama said the blueprint "won't just throw money at our problems - we'll invest in what works. The true test of policies we'll pursue won't be whether they're Democratic or Republican ideas, but whether they create jobs, grow our economy, and put the American Dream within reach of the American people."

    Democrats and Republicans expressed reservations about Obama's plan - in the Dems' case, it was not necessarily about spending all that money, but using a portion of it for tax breaks as a means to stimulate economic activity.

    Without the passage of the stimulus, "construction would continue to be among the hardest hit industries," Sandherr said. But "if Congress commits to the money," he added, construction employment prospects "would dramatically improve. We are doing everything imaginable to ensure that our construction employment and business forecast does not become a reality."

    When asked if one state or region has been hit harder than another, Ken Simonson, chief economist for the AGC, said "from what I've been seeing, there downturns in almost every state. There are just a handful of states (including areas of Texas and Oklahoma) that have more people on hand for work today than a year ago."

    But the work outlook in those states is expected to worsen soon too, he said.

    Naysayers who claim that infrastructure makes a poor stimulus because it takes a while for projects to start are off-base, the AGC leaders said, with billions of dollars in projects that are "shovel ready."

    Brian Burgett, the CEO of an Ohio construction firm, at the news conference cited the (non)construction of a twin 1,000-foot lock in Sault Ste. Marie that has been on the drawing boards for years. The lock, expected to cost $300 million, would work as a backup in case of a malfunction of the Poe Lock, the only working 1,000-foot lock in place at the Soo. "The design has been approved," Burgett said. "There is no…money to fund it. There is just an immense amount work out there that's ready to go."


    Job losses explode in final quarter of 2008

    Employment in the U.S. construction industry is hurting, but Hardhats have plenty of company.

    On Jan. 9 the Bureau of Labor Statistics reported that the nation shed 524,000 jobs in December, capping 12 months of declining payroll employment. The BLS figures show that the U.S. economy lost nearly 2.6 million jobs since December 2007. Job losses accelerated sharply in the last quarter of 2008, with an average of 216,000 jobs lost per month over the year but an average of 510,000 lost per month in the last three months.

    "As this jobs picture shows, the U.S. labor market is deteriorating more quickly than in past recessions, and virtually all signals indicate that the economy is no where near the bottom," said Heidi Shierholz of the labor-backed Economic Policy Institute. "Since U.S. consumers are now under such strain that they are unable to consume what the economy is able to produce, the government is the sole remaining spender with the capacity to bolster aggregate demand and thereby create jobs.

    "It is essential that government now embrace that role with swift action on a massive recovery package large enough to generate sufficient jobs to prevent further increases in the U.S. unemployment rate."

    The EPI reported that the total loss of more than 1.5 million jobs in the fourth quarter of 2008 - a 1.1% drop in employment - the largest quarterly loss as a percentage of employment since the first quarter of 1975.

    The unemployment rate rose from 6.8% in November to 7.2% in December, the highest rate in almost 16 years, and an increase of 2.3 points since the recession started in December 2007, when the unemployment rate was 4.9%. Over the past 12 months, 3.5 million workers have been added to the jobless rolls. There are now 11.1 million unemployed workers in this country.

    "As bad as the official 7.2 percent unemployment rate is," the AFL-CIO said, "the situation for unemployed or underemployed is actually far worse. The official unemployment rate of 7.2 percent does not include underemployed workers and those who are discouraged, and if they were included, analysts estimate the U.S. unemployment rate would be 13.5 percent, up 6 percentage points from 2007."
    On Jan. 7, the BLS reported that Michigan's November seasonally adjusted jobless rate was 9.6 percent, the nation's highest. The highest rate in November was in northeast lower Michigan at 12.2 percent. The lowest rate was 6 percent in the Ann Arbor area.



    A few simple truths to guide the way…

    By John Sweeney
    AFL-CIO President

    We all know there are tough times ahead - but 2009 gives us a jolt of hope for the change we need. Here are 10 simple truths to guide our work - and our elected leaders' work - every day of 2009.

    1) We can't fix the economy by hurting workers. Workers didn't tank the economy. We built it. Working families are the economy.

    2) Rescuing the economy will require investments - in jobs, infrastructure, health care and more. We can't get out of a hole this deep without building a big ladder.

    3) Rebuilding our broken economy gives us the opportunity to get it right this time. We've seen that an economy built on debt and speculation won't work. Rampant deregulation won't work. Corporations and anti-worker leaders have kicked the legs of government and wages out from under the economic table. No wonder it collapsed. Replacing the economic "legs" of family-supporting wages and benefits and responsible rules will work.

    4) We need to stop pretending that American employers can or should compete with companies in countries that subsidize industry, pay for workers' health care or trample labor and environmental protections. America's employers need a level playing field created by raising standards here and abroad, not lowering standards in a global race to the bottom.

    5) It's time for change. America voted for it. America needs it. We demand it. For too long our country has been headed in the wrong direction. It's time to turn around America.

    6) Progressive, pro-working-family candidates won resoundingly in the 2008 elections. If we allow a minority of Senate Republicans to block our priorities or impose their unpopular will on the majority, we have had our votes stolen.

    7) Corporate officials who through fraud, negligence or greed cost workers and retirees their jobs, savings, home equity and retirement security should get jail terms, not government handouts.

    8) Economic injustice and inequality are intolerable and should not be allowed to survive this new year. The average CEO makes $40,556 every working day, more than $10,000 over what the average worker makes in a year. A woman earns less than 80 cents for every dollar a man earns. African Americans' median weekly earnings are $150 less than those of white workers; for Latinos, the difference is $210 a week. The richest 10 percent of U.S. households have 71 percent of our wealth. Income and wealth inequality are gaping, growing and they are tearing apart what should be one nation.

    9) U.S. labor law doesn't say corporations and the government must tolerate workers forming unions. It doesn't say corporations and government must allow unions if after using every trick in the books they can't stop them. The National Labor Relations Act explicitly says this nation's policy is to encourage collective bargaining and union representation for workers. You wouldn't know that from seeing what corporations do-and what the government has been allowing them to do - to workers who try to form unions and bargain for a better life. Let's restore the law of the land by enacting the Employee Free Choice Act.

    10) America is meant to be "of the people, by the people, for the people" - all the people, not the few. We can renew America's promise by renewing national commitment to our founding values.


    News Briefs

    Back or front burner for labor's EFCA?
    Organized labor's top priority certainly isn't a priority for Republicans in Congress, and it may not be a priority for a lot of Democrats, either.

    A Jan. 2 column in the Wall Street Journal by Kimberly Strassel said the Obama Administration has indicated to union leaders it would first focus on fixing the economy. She wrote that Obama or Congressional Democrats have "no intention of jumping straight into the mother of all labor brawls."

    The Employee Free Choice Act would level the playing field for union organizers by changing federal law to allow workers to simply sign a card indicating they desire union representation. Such a system would supplant existing law, which allows for employers to call for a formal election process, which can take months or years.

    Unions have long maintained that such delays allow employers to coerce or threaten workers into shunning union representation - a system which has seriously weakened the ability of unions to grow. With that knowledge, the U.S. business community is ready to spend millions in a campaign to fight the Employee Free Choice Act. A majority of Senators voted for the EFCA last year, but Republicans threatened a filibuster to hold up its passage, and President Bush would have vetoed it, anyway.

    That fact that the EFCA wasn't going to pass provided political cover for what Strassel called "wobbly" Democratic senators from anti-union Red states - especially those up for re-election next year - who now aren't eager to see the Employee Free Choice Act come up for a vote.

    Labor leaders think those wobblies can be given a backbone on this issue, and are looking for a vote by Labor Day on the EFCA.

    Plenty support for U.S. unions - poll
    Sentiments in Congress may be all over the map regarding the Employee Free Choice Act.

    But a Peter Hart poll released this month found that nearly four in five (78%) U.S. adults favor legislation that "would make it easier for workers to bargain with their employers."

    This includes nearly half (46%) of Americans who strongly favor legislation to that end. Just 17% of adults oppose legislation making it easier for workers to bargain with their employers for better wages, benefits, and working conditions.

    A majority (69%) of Americans agree that it is very or fairly important to have strong laws that give employees the freedom to make their own choice about whether to form a union in their workplace. Half (50%) of Americans say this is very important.

    The poll, according to the Huffington Post, "is meant in part to demonstrate that contention over the bill is mostly limited to the halls of power in Washington; among ordinary Americans, union officials say, EFCA enjoys strong support."

    Several sources indicate that labor and Democrats have been buoyed by the ineffectiveness of anti-EFCA ad campaigns funded by big business groups.


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