One of Philadelphia's biggest pension plans is coping with the big investment losses of the past few years by trimming benefits and diverting money toward retirement instead of wages and healthcare - while still leaving room for more speculative local investments.
The Carpenters Pension & Annuity Fund of Philadelphia and Vicinity's $1.4 billlion investment portfolio took an 11 percent hit in fiscal 2008 when the stock market collapsed.
It recovered some of the lost ground in the past year as the market recovered. Still, the system, which insures retirement pay for 5,300 pensioners, 7,700 working carpenters (many idled by the recession), and more than 2,000 retirees who are slated to collect pensions in the future, reported in April it had just 53 cents set aside last year for every $1 it's going to need.
To cut that accounting deficit and cope with tough times, the plan this year cut pension accrual rates, decreasing pensions for future retirees; tightened rules for disability benefits; and lengthened the minimum service for early retirement, to 25 years, from 20 years, among other changes.
The new contract signed with union builders this year also diverted 60 cents of the total 75 cent an hour increase to the pension plan. The other 15 cents will go to the Carpenters' medical plans. That leaves no cash left over: "There'll be no wage increase this year," Jim McKeogh, Conshohocken-based fiduciary for the plan, told me.
The Carpenters have also been hammered by losses to more than $200 million in private investments and investment funds. That includes $45 million the Carpenters invested for a 38 percent stake in Philadelphia Media Holdings LLC, former owner of the Inquirer. The plan lost all $45 million when that company, headed by Brian P. Tierney, went bankrupt last year.
That hasn't scared off the Carpenters, headed by President Ed Coryell. A month after PMH went belly-up, the union lent $10 million to the Mid-Atlantic Real Estate Investmetn Fund LP, a fund set up by lawyer and developer Jeffrey Rotwitt, who was fired by his law firm earlier this year after it was disclosed he was being paid by Pennsylvania for negotiating a new Family Court building on a site he partly owned.
The fund used the Carpenters' money as a loan to Rotwitt's Sun Center Studio Corp., a state-backed film studio project in Delaware County that has yet to announce the major Hollywood films Rotwitt hopes to lure to the former Sunoco recreation site. Rotwitt didn't return calls seeking comment.
How can the Carpenters afford such risks, when times are tight? McKeogh said the fund's "conservative assumptions" make room for more aggressive investments."They have a lot of bonds," McKeogh told me. "That kept them out of the volatility in 2008" and limited losses. "So they do private equity investments. Some do well, some do poorly. But on a $1.4 billion fund, these aren't big committments, percentage wise."