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Annual Funding Notice
For The
Western Pennsylvania Teamsters And Employers Pension Plan

INFORMATION PERTAINING TO THE ATTACHED "ANNUAL FUNDING NOTICE"

December 15, 2007

Introduction

The U.S. Department of Labor ("DOL") requires, pursuant to the terms of the Pension Funding Equity Act of 2004 ("PFEA of 2004"), that all multiemployer pension plans provide participants with an Annual Funding Notice. The Annual Funding Notice is enclosed with this letter. This Notice contains standardized language which is required by the DOL to show information pertaining to pension plan terminations and insolvency. The Notice sections titled, "Rules Governing Insolvent Plans" and "Benefit Payments Guaranteed by the PBGC" are required by DOL regulations. Please understand that this is mandated language and is not an indication as to whether or not these conditions will ever apply to this Fund. Based on the current status of the Western Pennsylvania Teamsters and Employers Pension Fund ("Fund") and a reasonable forecast of future events, as developed by our consultants, we do not foresee the Fund becoming insolvent nor needing PBGC relief. 

The Board of Trustees ("Trustees") of the Fund do not want you to assume that this information is being provided to you due to a likelihood that this Fund will soon become insolvent. The funding and plan termination information contained in the Notice complies with DOL regulations. However, it is the opinion of Trustees that the attached Notice does not provide you with a realistic view of the current status and future outlook of the Fund. The intention of this cover letter is to more fully explain some of the federally mandated information contained in the Notice and to provide you with a better understanding of your pension plan. The Annual Funding Notice is required irrespective of a pension fund's financial condition and whether a pension fund meets the federally mandated funding levels. In fact, this Fund does presently meet the federally mandated funding levels. 

Soon, we will be providing you with other notices and information concerning the funding improvement measures mandated under the Pension Protection Act of 2006 ("PPA"), effective January 1, 2008. The PPA sets specific funding percentage targets which are calculated differently than the funding percentages which the PFEA of 2004 requires to be stated in the enclosed Annual Funding Notice. On the one hand, the PFEA of 2004 includes information applicable under very conservative methods which assume a plan is terminating and will receive no future contributions. On the other hand, the PPA of 2006 calculates a pension fund's funding status using ongoing assumptions actually used in the operation of the pension fund. 

In order to put the attached Annual Funding Notice in proper perspective, the Trustees have asked the Fund's Actuary to include a section entitled "Additional Explanation" at the end of the Annual Funding Notice. As explained by the Fund Actuary, the Fund's funding percentage under the ongoing assumptions actually used to operate the Fund was at the 72.5% as of January 1, 2006. While this funding percentage is below the level the Trustees maintained during the 1990s, steps are presently under way to improve the funding to ensure a secure retirement income for you and your family. After the Fund's earning and actuarial experience for 2007 are evaluated, the Trustees will review the existing funding improvement measures as required by the PPA. 

If there are any questions concerning the enclosed Annual Funding Notice, please contact the Trustees at the following address and phone number: Board of Trustees, Western Pennsylvania Teamsters and Employers Pension Fund, 49 Auto Way, Pittsburgh, PA 15206-3663, 412-362-4200, or toll free 800-362-4201.
 

TRUSTEES OF THE WESTERN PENNSYLVANIA

TEAMSTERS AND EMPLOYERS

PENSION FUND

___________________________________________

ANNUAL FUNDING NOTICE FOR

WESTERN PENNSYLVANIA TEAMSTERS AND

EMPLOYERS PENSION FUND

Introduction 

This notice, which federal law requires all multiemployer plans to send annually, includes important information about the funding level of Western Pennsylvania Teamsters and Employers Pension Fund, Plan Number 001, EIN 25-6029946 (Plan). This notice also includes information about rules governing insolvent plans and benefit

payments guaranteed by the Pension Benefit Guaranty Corporation (PBGC), a federal agency. This notice is for the plan year beginning January 1 and ending December 31, 2006 (Plan Year). 

Plan's Funding Level 

The Plan's "funded current liability percentage" for the Plan Year was 54%. In general, the higher the percentage, the better funded the plan. The funded current liability percentage, however, is not indicative of how well a plan will be funded in the future or if it terminates. Whether this percentage will increase or decrease over time depends on a number of factors, including how the plan's investments perform, what assumptions the plan makes about rates or return, whether employer contributions to the fund increase or decline, and whether benefit payments from the fund increase or decline. 

Plan's Financial Information 

The market value of the Plan's assets as of January 1, 2006 was $1,039,250,298. The total amount of benefit payments for the Plan Year was $101,845,940. The ratio of assets to benefit payments is 10.2 times. This ratio suggests that the Plan's assets could provide for approximately 10.2 years of benefit payments in annual amounts equal to what was paid out in the Plan Year. However, the ratio does not take into account future changes in total benefit payments or plan assets. 

Rules Governing Insolvent Plans 

Federal law has a number of special rules that apply to financially troubled multiemployer plans. Under so-called "plan reorganization rules", a plan with adverse financial experience may need to increase required contributions and may, under certain circumstances, reduce benefits that are not eligible for the PBGC's guarantee (generally, benefits that have been in effect for less than 60 months.) If a plan is in reorganization status, it must provide notification that the plan is in reorganization status and that, if contributions are not increased, accrued benefits under the plan maybe be reduced or an excise tax may be imposed (or both). 

Despite the special plan reorganization rules, a plan in reorganization nevertheless could become insolvent. A plan is insolvent for a plan year if its available financial resources are not sufficient to pay benefits when due for the plan year. An insolvent plan must reduce benefit payments to the highest level that can be paid from the plan's available financial resources. If such resources are not enough to pay benefits at a level specified by law (see Benefit Payments Guaranteed by the PBGC, below), the plan must apply to the PBGC for financial assistance. The PBGC, by law, will loan the plan the amount necessary to pay benefits at the guaranteed level. Reduced benefits may be restored if the plan's financial condition improves. 

A plan that becomes insolvent must provide prompt notification of the insolvency to participants and beneficiaries, contributing employers, labor unions representing participants, and PBGC. In addition, participants and beneficiaries also must receive information regarding whether, and how, their benefits will be reduced or affected as a result of the insolvency, including loss of a lump sum option. This information will be provided for each year the plan is insolvent. 

Benefit Payments Guaranteed by the PBGC 

The maximum benefit that the PBGC guarantees is set by law. Only vested benefits are guaranteed. Specifically, it guarantees a monthly benefit payment equal to 100 percent of the first $11 of the Plan's monthly benefit accrual rate, plus 75 percent of the next $33 of the accrual rate, times each year of credited service. The PBGC's maximum guarantee, therefore, is $35.75 per month times a participant's years of credited service. 

Example 1: If a participant with 10 years of credited service has an accrued monthly benefit of $500, the accrual rate for purposes of determining the PBGC guarantee would be determined by dividing the monthly benefit by the participant's years of service ($500/10), which equals $50. The guaranteed amount for a $50 monthly accrual rate is equal to the sum of $11 plus $24.75 (.75 x $33), or $35.75. Thus, the participant's guaranteed monthly benefit is $357.50 ($35.75 x 10). 

Example 2: If the participant in Example 1 has an accrued monthly benefit of $200, the accrual rate for purposes of determining the guarantee would be $20 (or $200/10). The guaranteed amount for a $20 monthly accrual rate is equal to the sum of $11 plus $6.75 (.75 x $9), or $17.75. Thus, the participant's guaranteed monthly benefit would be $177.50 ($17.75 x 10). 

In calculating a person's monthly payment, the PBGC will disregard any benefit increases that were made under the plan within 60 months before insolvency. Similarly, the PBGC does not guarantee pre-retirement death benefits to a spouse or beneficiary (e.g., a qualified pre-retirement survivor annuity). If the participant dies after the plan terminates, benefits above the normal retirement benefit, disability benefits not in pay status, or non-pension benefits, such as health insurance, life insurance, death benefits, vacation pay, or severance pay. 

Where To Get More Information 

For more information about this notice, you may contact the Board of Trustees, Western Pennsylvania Teamsters and Employers Pension Fund at 49 Auto Way, Pittsburgh, PA 15206-3663, telephone 412-362-4200 Toll Free 800-362-4201, email: contactus@wpapensionfund.com. For more information about the PBGC and multiemployer benefit guarantees, go to PBGC's Web site, http://www.pbgc.gov, or call PBGC toll-free at 800-400-7242 (TTYITDD users may call the Federal relay service toll free at 800-877-8339 and ask to be connected to 800-400-7242).

___________________________________________

"ADDITIONAL EXPLANATION" 

The Department of Labor requires us to send to all interested parties information in a standard format regarding the funding status of the Western Pennsylvania Teamsters and Employers Pension Plan (the "Plan"). This cover letter attempts to put the attached Annual Funding Notice in perspective. 

Pension plans are designed to accumulate contributions and investment earnings so that sufficient assets are available to pay pension benefits at retirement. The Trustees of the Plan have engaged consultants to ensure that the Plan is funded in accord with standards under Federal law. Among them are actuaries who certify that the Plan is properly funded under Federal law, utilizing a series of commonly used assumptions regarding items like mortality rates and long-term interest rates that reflect investment performance. 

One measure of the funding status of a pension plan is commonly expressed as the "funded percentage" equal to the ratio of the Plan's assets (contributions plus investment returns) to the Plan's liabilities (value of future benefits plus operating expenses). There are numerous ways in which the percentage can be determined. 

In the Notice section titled, "Plan's Funding Level", the "funded current liability percentage" required to be reported to you is based on a very conservative interest rate and mortality table dictated by law. The required rate of return used in the Notice is 5.77% per year. This interest rate assumption is low when compared with the long term interest rate that is being used by the plan of 8.00% per year. The lower the interest rate, the lower the "funded percentage". 

If we reported the "funded percentage" based on the 8.0% interest rate that is used to fund the plan, rather than the conservation assumptions required by existing DOL regulations, the percentage would be 72.5% versus the 54% contained in this Notice. In fact, next year, the Pension Protection Act of 2006 eliminates the confusion by allowing the funding status to be certified under the actuarial assumptions actually used to operate the plan. 

In the Notice section titled, "Plan's Financial Information", the Fund is required to state that it will be able to make approximately 10.2 years of benefit payments assuming no further contributions or earnings. Of course, this ignores the obvious fact that future employer contributions, earnings on investments, or other changes to the Plan, are expected so that all benefits past, present and future will be paid. 

Finally, the Notice sections titled, "Rules Governing Insolvent Plans" and "Benefit Payments Guaranteed by the PBGC" requires a discussion of insolvent multiemployer funds and the PBGC benefit guarantees were the Fund to terminate. Please understand that this is cautionary information only and is not an indication as to whether or not these conditions will ever apply to this Fund. The Western Pennsylvania Teamsters and Employers Pension Plan has been providing benefits for Plan retirees and beneficiaries without interruption for over 50 years. In 2006, the Fund had total income of $171,000,000 comprised of employer contributions and investment income and made benefit payments of approximately $102,000,000 to over 12,700 retired participants and beneficiaries. 

The Trustees of the Plan have remained committed to operating the Plan on a financially sound basis and meeting all Federal funding requirements, with the goal of providing benefits to enable Plan participants the ability to obtain a secure financial future. 

If you have any additional questions regarding the Notice or this Additional Explanation, please contact the Western Pennsylvania Teamsters and Employers Pension Fund Office at 49 Auto Way, Pittsburgh, PA 15206-3663 or call 412-362-4200, or toll free 800-362-4201.

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