Sheet Metal Workers’ National Pension Fund Update

NPF Update Status of the Fund Positive Cash Flow Variable Benefit Accrual Rate (VBAR) Contribution Rates Organizing Tools Leveraging Assets SHEET METAL WORKERS’ NATIONAL PENSION FUND 2

NPF Funding 2016 2015 2014 2013 January 1 2016 January 1 2015 Plan Year 2016 2015 2014 2013 Valuation Date January 1 2016 January 1 2015 January 1 2014 January 1 2013 Funded Percentage 59.4% 59.3% 59.1% 57.4% Value of Assets $4,294,266,345 $4,140,279,634 $3,940,831,853 $3,711,928,315 Value of Liabilities $7,230,768,938 $6,987,384,126 $6,671,514,903 $6,463,106,428

Contrast Assumptions v. Experience Participant count as of 2013 will remain flat thru 2026 Hours will be the same as 2013 Investment return 7.5% CBA’s that clearly spell out increases are counted Experience 2015 Slight increase in participants Hours up about 4.7% Investment return -0.42% (market value actuarial basis) Contribution income up 12%

Sheet Metal Workers' National Pension Fund: Credit Balance and Funded Percentage Projections Assuming 90 Million Hours/Year and 5.0% Returns through 2021 Projected Year-End Credit Balance for Plan Years Beginning January 1 1.20 1.00 0.80 0.60 0.40 0.20 0.00 $ Billions 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Projected Funded Percentage as of January 1 2026 2027 2028 2029 2030 2031 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Based on the actual experience of 2016, the Plan is projected to enter the Green Zone in 2028, and is projected to meet the requirements of the Funding Improvement Plan.

EVOLUTION: Leveraging Assets NPF moved assets into these funds from S&P 400, S&P 500, S&P 600 and other index funds resulting in annual fee savings of $120,000. Other National Funds (LU&C and SASMI) making similar moves that will result in $40,000 savings. Legal and General Index Funds An initiative of SMART to leverage funds across the sheet metal industry. Requires no minimum investment. Fees for smaller funds will be the same as NPF fees. Arrangement is only for sheet metal funds.

EVOLUTION: Leveraging Assets North America’s Building Trades Unions (NABTU) ProxyVote Plus Investment Database “NABTU’s Capital Strategies program was created in 2016 to facilitate a more active partnership between NABTU and the trustees, administrators, advisors and investment managers of our members’ pension savings in the pursuit of benefit improvements and prudent, responsible and financially sound investment policies.” Compiling and tracking total investments of our Funds will give Sheet Metal and all of Building Trades one collective voice as we steward the assets of our members.

In the News “Iron Workers pension cuts approved; retirees to get smaller checks” “Union pension fund plans 30 percent cut to retiree benefits” “Teamsters’ Pension Plans Seek Massive Cuts to Retirees to Stay Solvent”

Multi Employer Pension Reform Act of 2014 Provided tools for seriously critical funds to remain solvent. One tool: cuts to benefits meant to be less than the cuts pensioners would realize with the PBGC.

Applications for Benefit Suspensions Under MPRA Alaska Ironworkers Pension Plan In Review Automotive Industries Pension Fund Denied Bricklayers & Allied Craftsmen Local No 7 Pension Plan Withdrawn Bricklayers And Allied Craftworkers Local 5 Pension Plan Central States, Southeast And Southwest Areas Pension Plan IAM Motor City Pension Fund Iron Workers Local 17 Pension Fund Approved Ironworkers Local 16 Pension Fund Local 805 IBT Pension and Retirement Plan New York State Teamsters Conference Pension & Retirement Fund Road Carriers Local 707 Pension Fund SW Ohio Regional Council for Carpenters Pension Plan Teamsters Local 469 Pension Plan United Furniture Workers Pension Fund Pension Fund A Western States Office and Professional Employees Pension Fund  

NONE OF THESE TOOLS ARE AVAILABLE TO THE NPF WE CANNOT MAKE PENSION CUTS We are not critical and declining. We are not red zone. We are endangered, yellow zone. We are not expected to become insolvent. ere not expected to become iove. We have a funding improvement plan which projects us to be green by the end of the funding improvement period.

Annual Investment Return Variable Benefit Accrual Rate - 2017 Plan Year Annual Investment Return 2013 20.56% 2014 6.12% 2015 -0.42% 3 year average 8.75%

Average for 2017 VBAR was 8.75% so accrual for 2017 is 1.0% VBAR Formula IF, the three-year average market value investment return percentage reported in the preceding Plan Year’s Actuarial Valuation is: THEN, the VBAR rate of Accrual for the Plan Year will be: 10% or higher 1.25%* 8.5% or higher, but less than 10% 1.0%* 6.5% or higher, but less than 8.5% 0.75%* Greater than 0%, but less than 6.5% 0.5%* 0% or less 0%* Average for 2017 VBAR was 8.75% so accrual for 2017 is 1.0% *FOR 55/30 CONTRIBUTION RATE, THE ACCRUAL IS 70% OF AMOUNTS LISTED.

VBAR From the Start 2014 VBAR 2015 VBAR 2016 VBAR 2017 VBAR 2018 VBAR TBD 2015 -0.42 2014 6.12% 2013 20.56% 2012 11.98% 2011 -1.72% 2010 14.48% 24.74 30.82 38.66 26.26 TBD 3 Year Avg 8.25% 10.27% 12.89% 8.75% TBD VBAR 0.75% 1.25% 1.00%

Contribution Rates First Alternative: 7% Increase Required in 2017 Second Alternative: 3.5% Increase Required 2017 Default: No increase required in 2017 2018 and 2019: Trustees have determined that, barring any catastrophic events impacting the plan, there will be no mandated increases. Beyond 2019: TBD

EVOLUTION: Organizing Tools Owner Member Exclusions: Trustee Resolution to allow new Owner Members to participate in the plan but exclude contributions on themselves for one year. Free Look: A BRAND NEW Employer who signed a CBA, and began contributing in 2015, 2016, or 2017 will not be assessed withdrawal liability if its obligation to contribute ceases w/in 48 months.

Employers Using These Tools Free Look 2015: 4 Employers Approved 2016: 12 Employers Approved 2017: 9 Employers Approved 1 Pending Requests Owner Member Exclusions 2016: 4 Employers Approved 2017: 1 Pending Request

Unfunded Vested Liability The December 31, 2015 Withdrawal Liability Valuation establishes the basis for WDL for withdrawals that occur in the 2016 Plan Year. 2014: $4.41 billion 2015: $4.86 billion Increase: $449 million

Unfunded Vested Liability The Long Term Interest Rate Assumption used for Funding is 7.5%. The 2015 return was –0.42% PBGC Interest Rate Changed for both short term and long term. 3.10% and 3.29% To 2.46% and 2.98% Lower Interest Rates = Higher Liabilities Other demographic changes (i.e. more or fewer deaths than expected) also can impact the UVL.

Unfunded Vested Liability UVL @ 12/31/14 $4.407 Low Investment Return $176 Change in PBGC Interest Rates $197 Other Changes (Demographics) $76 Total Changes $449 UVL @ 12/31/15 $4.856

Non-Discrimination Testing Requirement of qualified plans to ensure that the benefits, rights, and features of a plan do not discriminate in favor of highly compensated employees. HCE in 2017 is an employee who earned $120,000 or more in 2016. Required to do this testing every three years for employers who employ: Non Bargained Non Alumni HCE We will need your help to identify if your Local Union should be included in testing and to gather applicable data.

NPF Adoption Agreements The NPF was established in May 1966 to provide a defined benefit plan to collectively bargained employees. Adoption Agreements are Executed when no CBA is applicable to cover: Local Union Officials Health and other Benefit Fund Administrators Apprentice Coordinators and Part –time Instructors Employed by a JATC

Participation under an NPF Adoption Agreement Alumni Only – former sheet metal workers that worked in Covered Employment under the Plan. Alumni and Non-Alumni (excludes employees that are covered under a collective bargaining agreement to which the Employer is a party e.g. clerical employees covered by an OPEIU agreement). Other exclusions include Part-time hourly (JATC) – What about the week that they travel for training? Trustees, warden, conductor, steward, staffing for elections or picketing, President or Recording Secretary (not currently working fulltime for the Union).

Contribution Rate(s) under an NPF Adoption Agreement The single Contribution Rate in effect under the Collective Bargaining Agreement and any renewal, modification, or amendment of such successor Collective Bargaining Agreement. Such rate shall apply to all Covered Employees or the Employer. The highest Contribution Rate in effect in the Covered Employee’s Home Area as determined by the Collective Bargaining Agreement.

EVOLUTION: NCCMP Past Successes: Pension Protection Act of 2006 Worker, Retiree, and Employer Relief Act of 2008 Affordable Care Act Multiemployer Pension Reform Act of 2014 Current Priorities: PBGC Crisis Composite Plan Legislation Protecting the ACA

LWOOD@SMWNBF.org DELKINS@SMWNBF.org BOT@SMWNPF.ORG WWW.SMWNPF.ORG 800-231-4622