The Mission of The Joint Industry Board

JIB Mission
The Joint Industry Board of the Electrical Industry (JIB) was established in 1942 by the International Brotherhood of Electrical Workers, Local 3 and employers affiliated with the National Electrical Contractors
Association (NECA). Its mission is to promote harmony between employees and employers, administer benefits for members and their families and improve competitiveness through progressive management, education, training and technology.
The JIB provides services to over 30,000 families including retirement in the form of defined benefit and defined contribution plans, medical care, supplemental savings, hospitalization and dental insurance, worker’s compensation, professional training, scholarships, life insurance, death benefits, vacation and holiday reimbursement, legal assistance, clothing and tool reimbursement and tuition assistance. Each of these benefit programs or Plans is funded by separate trusts. The trusts contain investment portfolios tailored to meet the individualized objectives of the Plan.
Governance
Each Plan has a Board of Trustees, most with dual representation by officers of Local 3 and officers of the two employers’ associations: NECA and the Association of Electrical Contractors (AEC).
On behalf of all Plans, Trustees established the Finance Committee to oversee the portfolios and when necessary to recommend changes in composition, managers or investment style. The Plans are advised by subject matter experts including actuaries, certified public accountants, a general asset consultant and sector specific asset consultants. All Plan assets are housed at custodian banks and most are in Plan name at our custodian, State Street Bank.
Administration is delegated to the JIB and investment discretion is assigned to asset management companies. The JIB Investment Department reports monthly to the Finance Committee and is responsible for the supervision of 18 major Plans with total assets exceeding $12 billion. Responsibilities of all parties including investment guidelines are contained in a Statement of Investment Policy.
Investment Objectives
Plans makes benefit payments funded by the combination of contributions by members or employers and investment returns. As each Plan has unique characteristics, portfolios are constructed to meet individualized objectives. Objectives include:
‰Û¢‰ÛâLiquidity: the ability to sell securities without cost to meet payments.
‰Û¢‰ÛâPreservation of capital: investing in securities that are unlikely to lose money.
‰Û¢‰ÛâIncome: investing in securities that provide a steady stream of income to meet benefit obligations.
‰Û¢‰ÛâGrowth: asset classes or companies expected to grow at a higher rate relative to the market and thereby provide a higher rate of return.
Our Plan Objectives: Health and Welfare
Although each Plan has individual characteristics, there are categories of plans that share objectives. For example, health and welfare plans are established to meet medical, dental and hospitalization expenses as incurred by members and thus are primarily focused on capital preservation and liquidity. Coverage expansion established by the Affordable Care Act led to a decision in 2015 to add equity exposure to the portfolios to keep pace with higher medical expenditures and medical cost inflation.
Examples of Plans with similar objectives and thus similar construction are the Pension and Hospitalization Benefit Trust (PHBP) Health and Welfare, the Dental Benefit Plan of the Electrical Industry, the Dental Benefit Plan of the Elevator Industry and the Employer Security Fund (ESF) Health and Welfare Fund
At year-end 2016, the largest of these, the PHBP Health and Welfare Fund had the following composition:
Short maturity high quality
fixed income...................................... 74%
S&P 500 Equity index fund.............. 20%
Core US real estate funds..................... 5%
Money market fund............................... 1%
The average annual return for this Plan since 1989 inception is 4.8%. Given the likelihood of higher medical costs, the Plan is in the process of diversifying the fixed income component to include an allocation to inflation sensitive government securities and higher yielding fixed income portfolios.
Defined Benefit Pension Plans
Perhaps the most sacred and clearly the most complex commitment is the promise to fund retirement for members, making defined payments from retirement until death. The size of this obligation is estimated by plan actuaries who forecast number of retirees, benefits at retirement and longevity. The ability to meet the payments is calculated forecasting employer contributions and investment returns over a long time horizon.
Two Plans share the objective of producing returns matching the growth rate of benefits while providing income to pay current retirees, the PHBP and ESF Pension Trusts. At year-end 2016, the largest of these, the PHBP Pension Trust had the following composition:
Equities............................................. 46%%
Fixed income....................................... 39%
Real estate............................................ 11%
Alternative Investments....................... 4%
Money market fund........................... 0.2%
At $3.34 billion the total Plan is large, so the asset classes listed above represent the sum of many components. Within equities, there are separate allocations to small, mid and large size US stocks and an allocation to international stocks. Investment styles include indexed, active, quantitative and concentrated. Nine companies are employed by the Plan to manage equity portfolios. The fixed income allocation is broken down to short and intermediate high quality, US Government and mortgage-focused, inflation indexed and higher yielding core-plus mandates. The real estate portfolio is broken down into core and value-add style and includes six managers. The alternative investment portfolio, the smallest of the allocations, includes a merger fund and a small investment in clean energy infrastructure projects. Given the recent stock market strength, average annual returns for the past five years has been 7.9% and last year was 9.3%.
Defined Contribution Retirement Plans
Two of our larger Plans, the Deferred å_Salary Plan (DSP) and the Annuity Plan are distinguished by contributions of participants. They differ in how investment composition is decided. The DSP is our 401K Plan and investments are chosen by members from a menu developed by Trustees with the advice of our consultants. The largest option is the Capital Preservation Fund, a fixed income/money market surrogate that has a stable value and pays interest monthly. There are 3 other bond options, one indexed and two active. The Plan has eight equity options, two active, one international and a variety of capitalization targets. The balance of the options are the various Target Date Funds. These invest in a blend of indexed funds, US and international, equity and fixed income. The Funds are managed by Vanguard and rebalance from more aggressive to more conservative as one ages.
The Annuity Fund is also defined contribution but the asset allocation is decided by the Trustees. As many participants expect retirement payments from the Pension Trust, DSP and Social Security, this Plan has historically been invested in a conservative style. It is important to note that as with all Plans, Annuity returns cover expenses, however the Annuity Fund has the unique responsibility to pay death benefits. Death benefits now represent 0.7% of the returns. At year-end 2016, the Fund had the following composition:
Stable value fixed income................ 60%
Equities................................................. 21%
Real estate............................................ 11%
Alternative investments....................... 5%
Money market fund.............................. 3%
Specialty Plans
Members benefit from several specialty plans such as Additional Security Benefit Plan (ASBP), Legal Services, the Health Reimbursement Account Plan (HRA), Clothing and Tool, Apprenticeship and EESISP. At this time we will focus on the HRA and ASBP. Both funds have primary objectives of capital preservation and å_liquidity. Specifically, we have been asked to avoid loss in either of these Plans, both of which report to members on a six-month cycle. How to avoid losses then? The simplest strategy would be to buy a constantly maturing portfolio of six-month Treasury bills. Unfortunately, from December of 2008 until late 2015, six-month bills offered yields between 0 and 0.2%. Both Plans have administrative, custodial legal and accounting expenses which would make the net return to members negative in every reporting period. If one takes inflation into account, the outcome would have been even worse.
So the solution to this problem is to buy a diversified portfolio of high credit quality, short maturity bonds that consistently mature at 100 and reduce (but not remove) the possibility of mark downs. For the HRA that has meant an average credit quality of AA, an average maturity of 2.5 years and over a 10-year period, an average annual return of 3.2%.
The B Fund follows a similar strategy but as members have shown a tendency to leave monies in the Plan longer there is both a short bucket with characteristics like the HRA and a slightly longer portfolio with higher yield.
Congratulations if you have read this far. As you are aware, the outlook for the economy has improved lately and as a result interest rates (and stock prices) have risen and bond prices have declined. As mentioned in your December HRA statement, please be on the lookout for notice of a change to the strategy of the Plan that will be implemented at the close of the current accounting period on June 30th. This new configuration will protect account balances from price fluctuation and provide a consistent positive return.