Status of Our Pension Fund

[mike]

The Transit Employees Retirement Plan (TERP) had $2.7 billion in it
at the peak of the stock market bubble in October of 2007. At the end
of 2008 it had approximately $1.5 billion.

These staggering losses are a result of the failure of the Plan's
Trustees to modify the assumptions concerning returns on investments
as the world economy has changed over the last several years. During
a down market you would expect some loses, but not to the extent we
have experienced.

For many years the Plan has assumed an 8% return on investments. To
achieve this an asset allocation of 70% to stock market equities and
30% to fixed income vehicles is required.

In the period from 2004 to 2006, the Trustees discussed with the money
managers and the pension adviser whether this level of return was
realistic given the growing competition in the world's markets to U.S.
Corporations. These discussions were inconclusive.

Why is this important? If you decide that achieving an 8% return is
too risky, you reduce it and adjust your asset allocation
accordingly. Reducing your exposure to equities reduces your loses in
a down market.

Why this was not done, is a question you will have to ask the
Trustees.

What effect will all of these losses have on our pensions?

In theory it should have none. In the contract that we negotiated in
2004, Metro is required to make up any loses in our investments so as
to adequately fund the plan. At this time the Plan Actuary is making
a determination of the required contribution to keep our plan
adequately funded. His report will come out at the beginning of the
summer. Once he makes his report to the Trustees, Metro's
contribution rate automatically changes 60 days later. The report can
only be changed if both parties agree to it. This was also part of
the 2004 agreement.

Over the last 3 years, Metro's contribution has averaged about $30
million annually. This year, because of the losses in the market,
Metro's contribution will be close to $100 million.

In the current contract arbitration, Metro did not submit a proposal
to change the funding agreement, so an arbitrator can not change it.

What are Metro's options? They can use some of the stimulus money to
pay their contribution, they can refuse to pay and go to court and
seek some relief and risk a strike for violating the contract in such
a blatant way or they can come to the union, hat in hand, and offer to
settle the contract in a reasonable way in return for some relief on
their pension contributions.

Our pension is not protected by the PBGC or any other government
agency. Our only real guarantee is the strength of our union and the
fact that Metro is unlikely to go out of business.

In the private sector, defined benefit plans like ours are rapidly
becoming extinct. In the coming years we can expect a more concerted
attack on the defined benefit plans of government workers. The current
down turn in the stock market will be used to cut the benefits of
these plans. There are even plans being made to cut Social Security
benefits.

The union needs to have a serious discussion about these issues so
that we can prepare ourselves to fight to protect our pensions.