Posted:
March 2, 2010
By Tom Bethel
National President
Undaunted by an adverse decision from the Internal Revenue Service, the joint union-employer trustees of the American Maritime Officers Pension Plan have found a way for all AMO members in the 20-year service range to avoid mandatory retirement under IRS rules on or after January 1, 2011. The trustees' action locks in the right of all AMO members to make their own career and retirement decisions.
An amendment adopted by the trustees on February 11 allows deep-sea, Great Lakes and inland waters AMO members who reach or approach the 20-year benchmark on or before January 1, 2011 to work for as long as they want to beyond that date without jeopardizing earned monthly benefits due from the AMO Pension Plan upon actual retirement.
AMO members who reach 20 years of service after January 1, 2011, are assured the same opportunity.
On January 1, 2011, all AMO members and all applicants for AMO membership — regardless of service length at the time, and regardless of their status under the AMO Pension Plan — will be enrolled in the new employer-paid AMO Defined Contribution Plan under the 40-percent benefit schedule published earlier. The AMO Defined Contribution Plan is similar to the AMO 401(k) Plan and the AMO Pension Plan Money Purchase Benefit in that it establishes personal retirement investment accounts that can be managed individually.
The trustees' action — outlined in more detail below — will put many minds at ease. No longer faced with unwanted retirement next year, AMO members can now plan their futures on their own terms and timetables, with no pressure to pack it in at too young an age.
The difficult problem ...
The unsettling prospect of forced retirement in American Maritime Officers emerged in January 2010, when the IRS denied the trustees' request that AMO members who accept 20-year pensions — regardless of age — be allowed to remain at or return to work at sea. The trustees had stipulated to the IRS that monthly retirement benefits drawn by these AMO members would be suspended during such post-pension employment.
In its seven-page response to me as chairman of the AMO Pension Plan Board of Trustees, the Internal Revenue Service — which defines "normal retirement age" as 55 years, and which views retirement benefits received at earlier points as "subsidized early retirement benefits" — said the option proposed by the trustees was unacceptable. The IRS said that only individuals aged 62 or older "may qualify for and receive early retirement benefits … while they continue in employment."
The IRS ruling created a dilemma for the trustees. The return-to-work option was a critical element of the rehabilitation plan the trustees had developed after the defined benefit AMO Pension Plan in October 2009 slipped into "critical" funding status — the "red zone" — as defined under the federal Pension Protection Act of 2006. Over a reasonable time, the rehabilitation plan will enable the AMO Pension Plan to cover all of its current and projected liabilities.
The trustees could have proceeded with the option despite the IRS decision, but that would have cost the AMO Pension Plan its standing as a tax qualified benefit fund, and employer contributions to the AMO Pension Plan — another important element of the rehab strategy — would no longer have been tax deductible.
With its threat of involuntary retirement, the IRS ruling also represented a wrenching career complication for the seagoing AMO membership.
In its letter to me, the IRS advised that the AMO Pension Plan trustees could ask the federal tax agency for "a conference of right to review this decision and present additional information that you believe the (IRS) should take into account before finalizing this ruling."
But that seemed pointless to me, not only as chairman of the AMO Pension Plan Board of Trustees, but also as national president of American Maritime Officers — still the nation's largest and strongest union of merchant marine officers. We had already made a comprehensive and credible case for allowing AMO members to return to work after taking 20-year pensions. The remaining trustees agreed with me.
Meanwhile, we confronted additional urgent considerations — key points that led us to request IRS approval of the return-to-work option in the first place: the IRS ruling would force hundreds of AMO members to end their careers prematurely, beginning in January 2011; our union would then have significant difficulty meeting its manpower commitments under existing collective bargaining agreements and under government shipping charters; AMO would have to abandon its relentless drive for additional employment opportunities in diverse domestic and international maritime markets; most importantly, barring the skilled, dedicated and experienced professionals of AMO from their jobs at too soon a time would compromise U.S. ability to man strategic sealift ships and other military support service vessels in defense emergencies.
... and a sensible solution
Thus, the trustees had no choice but to return to the graving dock. Working closely for weeks with AMO Plans Executive Director Steve Nickerson, AMO Pension Plan actuaries, an actuarial consultant specializing in IRS rulemaking and counsel to AMO Plans, we developed the amendment to the rehabilitation plan.
Under the amendment, AMO members with 20 years of service next January 1 can remain at work after that date without jeopardizing earned monthly benefits from the AMO Pension Plan. However, these benefits will be deferred until actual retirement, and AMO members who continue working will earn no additional pension credits to be used in the calculation of the monthly benefit amount.
AMO members with fewer than 20 years of service next January 1 can remain at work and earn credits leading to 20-year pensions. These credits will count for vesting and eligibility, but they will not factor into benefit calculation.
AMO members with more than 20 years of service on or after next January 1 can remain at work and may qualify for early retirement monthly benefits at any age.
In all cases, monthly benefits due from the AMO Pension Plan upon actual retirement will be paid at rates calculated as of December 31, 2009 — the date all benefits from the AMO Pension Plan were frozen under the rehabilitation plan.
Under the amendment, many AMO members at or within 20 years of service will be able to retire at will — when they are ready — with their deferred annuities from the AMO Pension Plan and with distributions from the AMO Defined Contribution Plan, the AMO 401(k) Plan and the AMO Pension Plan MPB. Many will be able to roll the values of their defined benefits from the AMO Pension Plan into their AMO Defined Contribution Plan accounts once the AMO Pension Plan can cover all of its liabilities.
The IRS is not in the equation because, under the amendment, no one can collect monthly benefits until they actually withdraw from the industry.
The amendment will delay the point at which the AMO Pension Plan is able to meet its obligations to its participants, which will in turn postpone the intended elimination of the defined benefit AMO Pension Plan — a casualty of the nationwide retirement crisis brought about in the private and public sectors by the prolonged economic recession, the investment market meltdown of 2008 and the burdensome, unreasonable funding requirements of the Pension Protection Act.
But we — the trustees — saw the return-to-work option as a matter of practicality and principle. It was our priority — we acted responsibly under difficult and unprecedented conditions to preserve the right to individual choice and self-determination in American Maritime Officers, maximize retirement security for all AMO members, sustain our union's superior standing and secure AMO's future.
I ask all AMO members to monitor the online AMO Currents, their mailboxes and this publication for additional information as it becomes available. Meanwhile, please direct all questions about specific personal circumstances to the AMO Pension Plan, or feel free to discuss retirement issues generally with me — my cell phone number is 202-251-0349.
Trustees address '20 and out' pension issues in AMO
By Tom Bethel
National President
Undaunted by an adverse decision from the Internal Revenue Service, the joint union-employer trustees of the American Maritime Officers Pension Plan have found a way for all AMO members in the 20-year service range to avoid mandatory retirement under IRS rules on or after January 1, 2011. The trustees' action locks in the right of all AMO members to make their own career and retirement decisions.
An amendment adopted by the trustees on February 11 allows deep-sea, Great Lakes and inland waters AMO members who reach or approach the 20-year benchmark on or before January 1, 2011 to work for as long as they want to beyond that date without jeopardizing earned monthly benefits due from the AMO Pension Plan upon actual retirement.
AMO members who reach 20 years of service after January 1, 2011, are assured the same opportunity.
On January 1, 2011, all AMO members and all applicants for AMO membership — regardless of service length at the time, and regardless of their status under the AMO Pension Plan — will be enrolled in the new employer-paid AMO Defined Contribution Plan under the 40-percent benefit schedule published earlier. The AMO Defined Contribution Plan is similar to the AMO 401(k) Plan and the AMO Pension Plan Money Purchase Benefit in that it establishes personal retirement investment accounts that can be managed individually.
The trustees' action — outlined in more detail below — will put many minds at ease. No longer faced with unwanted retirement next year, AMO members can now plan their futures on their own terms and timetables, with no pressure to pack it in at too young an age.
The difficult problem ...
The unsettling prospect of forced retirement in American Maritime Officers emerged in January 2010, when the IRS denied the trustees' request that AMO members who accept 20-year pensions — regardless of age — be allowed to remain at or return to work at sea. The trustees had stipulated to the IRS that monthly retirement benefits drawn by these AMO members would be suspended during such post-pension employment.
In its seven-page response to me as chairman of the AMO Pension Plan Board of Trustees, the Internal Revenue Service — which defines "normal retirement age" as 55 years, and which views retirement benefits received at earlier points as "subsidized early retirement benefits" — said the option proposed by the trustees was unacceptable. The IRS said that only individuals aged 62 or older "may qualify for and receive early retirement benefits … while they continue in employment."
The IRS ruling created a dilemma for the trustees. The return-to-work option was a critical element of the rehabilitation plan the trustees had developed after the defined benefit AMO Pension Plan in October 2009 slipped into "critical" funding status — the "red zone" — as defined under the federal Pension Protection Act of 2006. Over a reasonable time, the rehabilitation plan will enable the AMO Pension Plan to cover all of its current and projected liabilities.
The trustees could have proceeded with the option despite the IRS decision, but that would have cost the AMO Pension Plan its standing as a tax qualified benefit fund, and employer contributions to the AMO Pension Plan — another important element of the rehab strategy — would no longer have been tax deductible.
With its threat of involuntary retirement, the IRS ruling also represented a wrenching career complication for the seagoing AMO membership.
In its letter to me, the IRS advised that the AMO Pension Plan trustees could ask the federal tax agency for "a conference of right to review this decision and present additional information that you believe the (IRS) should take into account before finalizing this ruling."
But that seemed pointless to me, not only as chairman of the AMO Pension Plan Board of Trustees, but also as national president of American Maritime Officers — still the nation's largest and strongest union of merchant marine officers. We had already made a comprehensive and credible case for allowing AMO members to return to work after taking 20-year pensions. The remaining trustees agreed with me.
Meanwhile, we confronted additional urgent considerations — key points that led us to request IRS approval of the return-to-work option in the first place: the IRS ruling would force hundreds of AMO members to end their careers prematurely, beginning in January 2011; our union would then have significant difficulty meeting its manpower commitments under existing collective bargaining agreements and under government shipping charters; AMO would have to abandon its relentless drive for additional employment opportunities in diverse domestic and international maritime markets; most importantly, barring the skilled, dedicated and experienced professionals of AMO from their jobs at too soon a time would compromise U.S. ability to man strategic sealift ships and other military support service vessels in defense emergencies.
... and a sensible solution
Thus, the trustees had no choice but to return to the graving dock. Working closely for weeks with AMO Plans Executive Director Steve Nickerson, AMO Pension Plan actuaries, an actuarial consultant specializing in IRS rulemaking and counsel to AMO Plans, we developed the amendment to the rehabilitation plan.
Under the amendment, AMO members with 20 years of service next January 1 can remain at work after that date without jeopardizing earned monthly benefits from the AMO Pension Plan. However, these benefits will be deferred until actual retirement, and AMO members who continue working will earn no additional pension credits to be used in the calculation of the monthly benefit amount.
AMO members with fewer than 20 years of service next January 1 can remain at work and earn credits leading to 20-year pensions. These credits will count for vesting and eligibility, but they will not factor into benefit calculation.
AMO members with more than 20 years of service on or after next January 1 can remain at work and may qualify for early retirement monthly benefits at any age.
In all cases, monthly benefits due from the AMO Pension Plan upon actual retirement will be paid at rates calculated as of December 31, 2009 — the date all benefits from the AMO Pension Plan were frozen under the rehabilitation plan.
Under the amendment, many AMO members at or within 20 years of service will be able to retire at will — when they are ready — with their deferred annuities from the AMO Pension Plan and with distributions from the AMO Defined Contribution Plan, the AMO 401(k) Plan and the AMO Pension Plan MPB. Many will be able to roll the values of their defined benefits from the AMO Pension Plan into their AMO Defined Contribution Plan accounts once the AMO Pension Plan can cover all of its liabilities.
The IRS is not in the equation because, under the amendment, no one can collect monthly benefits until they actually withdraw from the industry.
The amendment will delay the point at which the AMO Pension Plan is able to meet its obligations to its participants, which will in turn postpone the intended elimination of the defined benefit AMO Pension Plan — a casualty of the nationwide retirement crisis brought about in the private and public sectors by the prolonged economic recession, the investment market meltdown of 2008 and the burdensome, unreasonable funding requirements of the Pension Protection Act.
But we — the trustees — saw the return-to-work option as a matter of practicality and principle. It was our priority — we acted responsibly under difficult and unprecedented conditions to preserve the right to individual choice and self-determination in American Maritime Officers, maximize retirement security for all AMO members, sustain our union's superior standing and secure AMO's future.
I ask all AMO members to monitor the online AMO Currents, their mailboxes and this publication for additional information as it becomes available. Meanwhile, please direct all questions about specific personal circumstances to the AMO Pension Plan, or feel free to discuss retirement issues generally with me — my cell phone number is 202-251-0349.