Posted: June 3, 2019
DC Plan formula under trustee review; DB Plan relief strategy moves on two fronts
The joint union-employer trustees of the American Maritime Officers Defined Contribution Plan have agreed in principle to "reconfigure" the rules governing the calculation of retirement benefits earned from the Plan.
Under the potential rule revision, amounts deposited into each participant's tax-deferred DC Plan investment account would be determined exclusively by length of service at sea under AMO contract. A participant's age would no longer be a factor.
A concern among the trustees is that removing age from the equation could penalize senior engine and deck officers in key billets on ships operating under government contract and in commercial services.
This review of the AMO Defined Contribution Plan benefits formula follows AMO Plans trustee meetings at AMO headquarters in Dania Beach the week of May 20. AMO Plans personnel this week are completing an analysis of the potential impact of the rule change on all DC Plan participants under varied scenarios.
In a parallel development, Horizon Actuarial Services LLC - actuarial consultants to AMO Plans - is determining whether some employer contributions to the defined benefit AMO Pension Plan can be diverted safely to the AMO Defined Contribution Plan as the AMO Pension Plan's certified "green zone" funded status of better than 80 percent strengthens as projected over the next two-to-four years - a period in which the AMO Pension Plan is expected to reach full funding.
In both cases, the trustees' intent is to apply AMO Defined Contribution Plan reforms fairly and responsibly.
The trustees applied initial reform of the AMO Defined Contribution Plan three years ago, when they ended career-long DC Plan credits for participants who had qualified for and received one-time in-service lump-sum payouts from the AMO Pension Plan before this option was eliminated in 2009.
Under the 2016 rule revision, in-service lump-sum pension recipients earn DC Plan credits only from the dates of their AMO Pension Plan buyouts, instead of from the dates on which they began covered employment as AMO members.
Meanwhile, a strategy to ease the 10-year defined benefit AMO Pension Plan crisis within the limits of federal law remains in focus.
The AMO Pension Plan trustees agreed to increase earned benefits "frozen" in place when the Plan was suspended as deficient under the federal Pension Protection Act in December 2009. AMO Pension Plan personnel are calculating this one-time increase at various percentage rates. The actuaries will determine whether the increase keeps the AMO Pension Plan in the "green zone."
Horizon Actuarial Services - which by law must submit any AMO Pension Plan remedial measure to the Internal Revenue Service for approval - also began analyzing a proposal under which active vested AMO members with at least 20 years of service would have the option of collecting their earned benefits from the AMO Pension Plan while continuing to work. These benefit payments would be rolled over directly to each member's tax-deferred AMO Pension Plan Money Purchase Benefit account for growth through return on MPB investment.
This would require an exemption from IRS rules prohibiting the direct transfer of defined benefit payments to defined contribution accounts - an exemption we believe can be secured in the legitimate interest of national security.
As we all know, there is a perilous and growing shortage of the civilian American merchant mariners the government relies on exclusively for defense shipping services in distant emergencies, from mobilization to sustained resupply and reinforcement of U.S. Armed Forces in overseas conflict.
Once in place, the exemption we seek would provide an immediate and effective check on this shortage by encouraging AMO members frustrated by retirement circumstances to remain in the industry and continue to stand ready for military support services when the alarm sounds.
This is a reasonable approach, modeled after specific public sector pension rule exemptions for "first responders" - firefighters, police officers and emergency medical technicians.
Deep-sea, Great Lakes and inland waters AMO members are reminded that the state of the defined benefit AMO Pension Plan is influenced by day-to-day investment market performance, by interest rates and by actuarial assumptions and projections.
It is also important to note that federal law requires that monthly benefits now paid to AMO retirees and their survivors be sustained at current levels, and that obligations to "inactive vested" individuals - those no longer employed under AMO contract but due benefits at age 65 - are met.
All deep-sea, Great Lakes and inland waters AMO members will be advised of all developments as we proceed - specifically, the timing and the mechanics of each new or pending pension relief proposal - and all are free to contact me with questions or concerns. I can be reached toll free at 800-362-0513, on the office line at 954-921-2221 (Ext. 1001) or on my cell at 954-881-5651. If you call my cell and I can't take the call right away, I will get back to you, but I ask that you leave a voicemail.
American Maritime Officers