Posted:
March 19, 2015
In fiscal year 2014, investment returns for the defined benefit American Maritime Officers Pension Plan surpassed expectations for the third consecutive fiscal year.
For the fiscal year that ended September 30, 2014, the AMO Pension Plan realized a total return on investments of 10.1 percent, exceeding both the assumed rate of return of 7.5 percent used by the Plan's actuary, Horizon Actuarial Services, and the rate of return that would have been produced by meeting the benchmarks for the various investment classes.
The performance of the Plan's investments in fiscal 2014 continued to be strong overall despite a slightly sub-par year for the asset classes of Commodities and International Equities, which compose less than 10 percent of the total Plan assets. It was a choppy year in the investment markets with seven of the 12 months showing positive or negative returns of 2 percent or more, with September, the last month of our fiscal year, showing a decline of 2.6 percent.
As of October 1, 2014, the defined benefit AMO Pension Plan was approximately 70.5 percent funded based on the preliminary market value of the Plan's assets - approximately $390.6 million - and the projected value of the Plan's accrued liabilities - approximately $554.0 million.
During fiscal year 2014, the Plan paid approximately $33.8 million in monthly benefits to participants and survivors.
The Plan remains in the "Yellow Zone" (endangered status) as defined by the Pension Protection Act of 2006.
Working with Horizon, the Plan's joint union-employer trustees continue to examine options for advancing the Plan to the Pension Protection Act's "Green Zone" (80 percent funded), as well as options to bring the Plan to full-funded status, which would then allow full contribution rates for the separate AMO Defined Contribution Plan to be implemented for all participants.
It will always remain the intent of the trustees to preserve the "20 and out" retirement option with monthly benefits from the defined benefit AMO Pension Plan. This is an important retirement option for AMO members, but it also increases the Plan's projected liabilities, and therefore negatively impacts the Plan's funding status from year to year.
The Plan has progressed significantly over the past few years. In fiscal year 2011, the Plan was funded at a level of 57.9 percent, with $504 million in accrued liabilities and assets valued at $292 million. In fiscal year 2014, the Plan had progressed to a funding level of approximately 70.5 percent, with $554 million in accrued liabilities and assets valued at $390.6 million.
The AMO Pension Plan Board of Trustees will continue to keep all Plan participants informed of any developments as they may occur.
The following is a breakdown of the performance of the AMO Pension Plan's investments in fiscal year 2014.
The overall performance of the AMO Pension Plan's investments is measured by "benchmarks" assigned by the investment advisor to the various asset classes held by the Plan. Benchmarks are the average rates of performance of asset classes as gauged by several indexes.
Had the Plan's investments in fiscal 2014 met the assigned benchmarks, the total return for the year would have been 10.0 percent. As the performance of the Plan's investments outperformed benchmarks in two of the three major asset classifications, the total return for fiscal 2014 was 10.1 percent.
The AMO Pension Plan's equity holdings - large-cap, mid-cap and small-cap stocks - generated a positive return of 16.52 percent surpassing the benchmark of 16.37 percent by 0.15 percent.
The AMO Pension Plan's fixed income holdings - core bonds, short-term treasuries, global bonds, high yield bonds, floating rate bonds and TIPS - generated a positive return of 3.82 percent surpassing the benchmark of 3.34 percent.
Other investment asset classes, which are not correlated to the U.S. markets - international equities, emerging market equities, commodities and real estate investment trusts - returned 2.42 percent to the Plan, which was lower than the benchmark of 3.68 percent for these investments.
The Plan currently has 53.8 percent of its assets in equity holdings, 32.3 percent of its assets in fixed income holdings and 13.9 percent of its assets in other investment asset classes.
Nine of the Plan's 18 investment managers surpassed benchmarks in their respective asset classes in fiscal 2014. Six additional managers missed their benchmarks by less than 1.5 percent, with the remaining three missing their benchmarks by less than 5.0 percent.
FY 2014 Report Card: Investment returns surpass expectations for Defined Benefit AMO Pension Plan
In fiscal year 2014, investment returns for the defined benefit American Maritime Officers Pension Plan surpassed expectations for the third consecutive fiscal year.
For the fiscal year that ended September 30, 2014, the AMO Pension Plan realized a total return on investments of 10.1 percent, exceeding both the assumed rate of return of 7.5 percent used by the Plan's actuary, Horizon Actuarial Services, and the rate of return that would have been produced by meeting the benchmarks for the various investment classes.
The performance of the Plan's investments in fiscal 2014 continued to be strong overall despite a slightly sub-par year for the asset classes of Commodities and International Equities, which compose less than 10 percent of the total Plan assets. It was a choppy year in the investment markets with seven of the 12 months showing positive or negative returns of 2 percent or more, with September, the last month of our fiscal year, showing a decline of 2.6 percent.
As of October 1, 2014, the defined benefit AMO Pension Plan was approximately 70.5 percent funded based on the preliminary market value of the Plan's assets - approximately $390.6 million - and the projected value of the Plan's accrued liabilities - approximately $554.0 million.
During fiscal year 2014, the Plan paid approximately $33.8 million in monthly benefits to participants and survivors.
The Plan remains in the "Yellow Zone" (endangered status) as defined by the Pension Protection Act of 2006.
Working with Horizon, the Plan's joint union-employer trustees continue to examine options for advancing the Plan to the Pension Protection Act's "Green Zone" (80 percent funded), as well as options to bring the Plan to full-funded status, which would then allow full contribution rates for the separate AMO Defined Contribution Plan to be implemented for all participants.
It will always remain the intent of the trustees to preserve the "20 and out" retirement option with monthly benefits from the defined benefit AMO Pension Plan. This is an important retirement option for AMO members, but it also increases the Plan's projected liabilities, and therefore negatively impacts the Plan's funding status from year to year.
The Plan has progressed significantly over the past few years. In fiscal year 2011, the Plan was funded at a level of 57.9 percent, with $504 million in accrued liabilities and assets valued at $292 million. In fiscal year 2014, the Plan had progressed to a funding level of approximately 70.5 percent, with $554 million in accrued liabilities and assets valued at $390.6 million.
The AMO Pension Plan Board of Trustees will continue to keep all Plan participants informed of any developments as they may occur.
The following is a breakdown of the performance of the AMO Pension Plan's investments in fiscal year 2014.
The overall performance of the AMO Pension Plan's investments is measured by "benchmarks" assigned by the investment advisor to the various asset classes held by the Plan. Benchmarks are the average rates of performance of asset classes as gauged by several indexes.
Had the Plan's investments in fiscal 2014 met the assigned benchmarks, the total return for the year would have been 10.0 percent. As the performance of the Plan's investments outperformed benchmarks in two of the three major asset classifications, the total return for fiscal 2014 was 10.1 percent.
The AMO Pension Plan's equity holdings - large-cap, mid-cap and small-cap stocks - generated a positive return of 16.52 percent surpassing the benchmark of 16.37 percent by 0.15 percent.
The AMO Pension Plan's fixed income holdings - core bonds, short-term treasuries, global bonds, high yield bonds, floating rate bonds and TIPS - generated a positive return of 3.82 percent surpassing the benchmark of 3.34 percent.
Other investment asset classes, which are not correlated to the U.S. markets - international equities, emerging market equities, commodities and real estate investment trusts - returned 2.42 percent to the Plan, which was lower than the benchmark of 3.68 percent for these investments.
The Plan currently has 53.8 percent of its assets in equity holdings, 32.3 percent of its assets in fixed income holdings and 13.9 percent of its assets in other investment asset classes.
Nine of the Plan's 18 investment managers surpassed benchmarks in their respective asset classes in fiscal 2014. Six additional managers missed their benchmarks by less than 1.5 percent, with the remaining three missing their benchmarks by less than 5.0 percent.