DB to DB Transfer (HOOPP/OMERS)

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Mordko
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Re: DB to DB Transfer (HOOPP/OMERS)

Post by Mordko »

The DB vs DC isn't entirely academic. It can and should be part of the decision-making equation on which employer one is joining.
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Re: DB to DB Transfer (HOOPP/OMERS)

Post by brucecohen »

Mordko wrote: 07 May 2017 19:54 I was given the Commuted Value, but not the PAR. Sounds like I was mislead on the timing of informing me what the PAR is going to be, so I will follow up - thanks.
Here is CRA's PAR guide for employers. Section 7 covers reporting deadlines.
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Re: DB to DB Transfer (HOOPP/OMERS)

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brucecohen wrote: 08 May 2017 08:46
Mordko wrote: 07 May 2017 19:54 I was given the Commuted Value, but not the PAR. Sounds like I was mislead on the timing of informing me what the PAR is going to be, so I will follow up - thanks.
Here is CRA's PAR guide for employers. Section 7 covers reporting deadlines.
Bruce, would you mind casting an eye over the following response I received from the company:
If a PAR is required, that will be determined only after you have received the full payment due to you, i.e. after you have received all the instalment payments. A PAR is only necessary if the commuted value paid to you is less than the accumulated sum of pension adjustments reported over the years you worked with the company.
Basically, they won't tell me what the PAR is until 2023. Apparently they asked the actuaries and this was the response. Is this correct? Does not seem to align with the information on the CRA site which requires for the PAR value to be provided within 60 days of reporting commuted value (that happened in March).
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Re: DB to DB Transfer (HOOPP/OMERS)

Post by brucecohen »

Mordko wrote: 18 May 2017 12:22 Bruce, would you mind casting an eye over the following response I received from the company:
If a PAR is required, that will be determined only after you have received the full payment due to you, i.e. after you have received all the instalment payments. A PAR is only necessary if the commuted value paid to you is less than the accumulated sum of pension adjustments reported over the years you worked with the company.
Basically, they won't tell me what the PAR is until 2023. Apparently they asked the actuaries and this was the response. Is this correct? Does not seem to align with the information on the CRA site which requires for the PAR value to be provided within 60 days of reporting commuted value (that happened in March).
I've never encountered this -- or any delays in getting a PAR -- and am not a lawyer. It seems that the plan is paying your CV in installments. I assume that's because the plan has a major deficit. I can think of only one reason for a delay in reporting the PAR: the plan administrator fears there might not be enough money to cover the full amount due. In that case your CV would be lower than initially calculated and your PAR would be correspondingly higher. But I don't see why the company couldn't then issue an amended PAR. I have two suggestions:

1. Get the name and address of the plan administrator, not the company's HR department. Send a registered letter asking the administrator for a full explanation including reference to the section(s) of the Income Tax Act or Income Tax Regulations under which they're delaying PAR issuance; or

2. Send a letter to your CRA district taxation office. Fully explain the situation and provide copies of all related documents including the recent response you got. Ask them is the plan/company is acting properly and, if not, whether CRA can compel the responsible party to issue your PAR. Note that CRA would likely take six months to process such a letter.

You could -- and tactically should -- send a letter describing your situation to the federal or provincial regulator that governs your plan and ask them if the plan/company is acting properly in delaying payment of your CV and issuance of your PAR.

BTW, I assume you have checked that the calculated CV is in fact less than your total PAs.
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Re: DB to DB Transfer (HOOPP/OMERS)

Post by Mordko »

brucecohen wrote: 18 May 2017 13:08
I've never encountered this -- or any delays in getting a PAR -- and am not a lawyer. It seems that the plan is paying your CV in installments. I assume that's because the plan has a major deficit. I can think of only one reason for a delay in reporting the PAR: the plan administrator fears there might not be enough money to cover the full amount due. In that case your CV would be lower than initially calculated and your PAR would be correspondingly higher. But I don't see why the company couldn't then issue an amended PAR. I have two suggestions:

1. Get the name and address of the plan administrator, not the company's HR department. Send a registered letter asking the administrator for a full explanation including reference to the section(s) of the Income Tax Act or Income Tax Regulations under which they're delaying PAR issuance; or

2. Send a letter to your CRA district taxation office. Fully explain the situation and provide copies of all related documents including the recent response you got. Ask them is the plan/company is acting properly and, if not, whether CRA can compel the responsible party to issue your PAR. Note that CRA would likely take six months to process such a letter.

You could -- and tactically should -- send a letter describing your situation to the federal or provincial regulator that governs your plan and ask them if the plan/company is acting properly in delaying payment of your CV and issuance of your PAR.

BTW, I assume you have checked that the calculated CV is in fact less than your total PAs.
Bruce - many thanks!

By my estimates, I won't get any PAR - assuming I understand the logic of PA/CV correctly. I have been with the company since 2004; the combined maximum RRSP room for 2004-2016 comes to about $270K. The CV is >2 times that and over 60% of CV is in LIRA. Its just that I am not 100% certain in my estimates.

And yes - the plan is only 57% funded so it does have a major deficit. According to this http://www.osfi-bsif.gc.ca/Eng/pp-rr/pp ... m-rrm.aspx, "In defined benefit plans, if the solvency ratio of the plan is less than 1.00 (i.e. solvency liabilities exceed plan assets), the plan may not be able to transfer the full pension benefit credit when employment ends. However, the employer must normally transfer the balance of the pension benefit credit , plus interest, within five years of the initial transfer." So, they are acting properly in delaying the payment.

Really appreciate your advice.
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Re: DB to DB Transfer (HOOPP/OMERS)

Post by brucecohen »

Mordko wrote: 18 May 2017 14:36 By my estimates, I won't get any PAR - assuming I understand the logic of PA/CV correctly. I have been with the company since 2004; the combined maximum RRSP room for 2004-2016 comes to about $270K. The CV is >2 times that and over 60% of CV is in LIRA. Its just that I am not 100% certain in my estimates.
The key date for a PAR calc is when you entered the DB plan, not when you joined the company. Many companies make new hires wait a year. But let's say you entered the DB plan in 2004 and left in 2016. Simply go back through your T4s* for those years and add up the pension adjustments (PAs). If CV is greater than total PAs there is no PAR due. I'm now guessing that your former employer/plan is playing coy in case there's not enough money to pay out your full CV. If the amount actually received is less than total PAs you will be due a PAR.

* I said T4s as opposed to tax returns in case you had two employers in 2004 and both reported PAs.
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Re: DB to DB Transfer (HOOPP/OMERS)

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Mordko wrote: 18 May 2017 14:36 By my estimates, I won't get any PAR - assuming I understand the logic of PA/CV correctly. I have been with the company since 2004; the combined maximum RRSP room for 2004-2016 comes to about $270K.
You seem to be comparing the wrong values.

Here is how it works:
1. You earn an "earned income"
2. RRSP room is 18% of #1, subject to an annual maximum
3. PA is calculated based on whatever pension benefits you accrued (based on the accumulation promised), and it reduces the amount in #2
4. Your final RRSP room is (#2 - #3)
5. CV is whatever you get, at the time you're leaving the pension plan (based on the current interest rates)
You should be comparing the amounts in #3 and #5, not the amounts in #4 and #5.
Mordko wrote: 18 May 2017 14:36 The CV is >2 times that and over 60% of CV is in LIRA.
Is it already, or will it be assuming all projected installments will be paid?
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Re: DB to DB Transfer (HOOPP/OMERS)

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adrian2 wrote: 18 May 2017 16:36
Mordko wrote: 18 May 2017 14:36 By my estimates, I won't get any PAR - assuming I understand the logic of PA/CV correctly. I have been with the company since 2004; the combined maximum RRSP room for 2004-2016 comes to about $270K.
You seem to be comparing the wrong values.

Here is how it works:
1. You earn an "earned income"
2. RRSP room is 18% of #1, subject to an annual maximum
3. PA is calculated based on whatever pension benefits you accrued (based on the accumulation promised), and it reduces the amount in #2
4. Your final RRSP room is (#2 - #3)
5. CV is whatever you get, at the time you're leaving the pension plan (based on the current interest rates)
You should be comparing the amounts in #3 and #5, not the amounts in #4 and #5.
Mordko wrote: 18 May 2017 14:36 The CV is >2 times that and over 60% of CV is in LIRA.
Is it already, or will it be assuming all projected installments will be paid?
@Adrian - My DB was leaving very little RRSP room; less than $1,000 annually. I therefore assumed that for all intents and purposes #2 = #3. I will check though using T4sm, as directed by Bruce.

The estimated CV is >2 times total RRSP room for those years assuming all projected installments will be paid. So far they paid the "funded" portion, which is 57% of CV.

Thanks.
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Re: DB to DB Transfer (HOOPP/OMERS)

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Mordko wrote: 18 May 2017 17:11 The estimated CV is >2 times total RRSP room for those years assuming all projected installments will be paid. So far they paid the "funded" portion, which is 57% of CV.
If the part already paid exceeds the total for PA's over the years, there will be no PAR, no matter whether or not they pay the 43% of CV still due.

2*57% = 114% > 1
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Re: DB to DB Transfer (HOOPP/OMERS)

Post by Mordko »

^ Right, that's what I figured but I'd like to hear it formally to make sure I didn't make a mistake. Like Bruce is saying, it's a simple calculation AND the rules require them to tell me what the PAR is within 60 days. Why keep schtum when asked???
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Re: DB to DB Transfer (HOOPP/OMERS)

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To close the loop... I sent them a formal letter. Yesterday the pension administrator got back to me with the PAR value. As expected the value is zero.

This whole saga left me wondering why they resisted. Well, suppose nothing I can do except sit and hope they stay solvent.
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Re: DB to DB Transfer (HOOPP/OMERS)

Post by Pension12345 »

Hrmm. Ok now I have a valuation:

5 years of service in OMERS will cost me $75,000 to buy in today.

The current commutable value I have in HOOPP: $110,000

$35,000 surplus I'm being told I will lose if I go forward with this reciprocal pension transfer. Would you give that up to get those years of service or take the $110k and buy back service? I'm being told that situation would come to a different (higher) valuation than the pension transfer.

It's a good situation to be in, just trying to make the right decision in order to maximize my outcome. Any thoughts or opinions?
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Re: DB to DB Transfer (HOOPP/OMERS)

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Pension12345 wrote: 15 Jun 2017 08:34 Hrmm. Ok now I have a valuation:

5 years of service in OMERS will cost me $75,000 to buy in today.

The current commutable value I have in HOOPP: $110,000

$35,000 surplus I'm being told I will lose if I go forward with this reciprocal pension transfer.
I'm not sure I understand what you mean by "surplus." Is that the CV you'd give up -- $110,000 minus $75,000? If so:
1. If you leave HOOPP and don't transfer to OMERS roughly 30% of the $110,000 CV will likely have to be taken as taxable cash unless you have enough unused RRSP room to absorb it. So part of the money could be lost this year and part might have to be invested in a taxable account.
2. If you commute, your LIRA/LIF will be fully exposed to market risk, inflation risk and longevity risk. A public DB plan -- whether HOOPP or OMERS -- will immunize you against those risks. (OTOH, this indicates that the CV calc assumed a very low average annual return. So your LIRA/LIF might earn enough to cover inflation and longevity but that's not certain.)

So, ISTM your choice is whether to leave your credits in HOOPP or transfer them to OMERS.
HOOPP and OMERS both pay 2% pensions, the most allowed by law. Assuming you stay in OMERS and income rises, that pension will have a higher earnings base than if you leave your money in HOOPP. Also, OMERS has somewhat better inflation protection, at least for now. I don't know if either plan offers any retiree benefits other than pension.
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Re: DB to DB Transfer (HOOPP/OMERS)

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Pension12345 wrote: 15 Jun 2017 08:34 5 years of service in OMERS will cost me $75,000 to buy in today.

The current commutable value I have in HOOPP: $110,000

$35,000 surplus I'm being told I will lose if I go forward with this reciprocal pension transfer. Would you give that up to get those years of service or take the $110k and buy back service?
To reiterate Bruce, there is no surplus.

If I were you, I would go forward with the pension transfer.
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Re: DB to DB Transfer (HOOPP/OMERS)

Post by Pension12345 »

Thanks Bruce & Adrian. So I suppose that I may be obsessing over my own perceived "cash loss" of $35K when I look at that larger CV from HOOPP? I'm definitely grateful that I have an opportunity to join OMERS and have my 5 years recognized/transferred from HOOPP; just trying to make sure I'm not leaving any money on the table by doing so.

I guess that once you factor in taxes, that CV surplus would shrink quite a bit if I declined the transfer and took the CV. From what I've read, many forum members suggest I ignore that imaginary "surplus" and focus on transferring my service over without regrets. I've never made any kind of decision like this so I've found the opinions of others on here to be helpful.
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Re: DB to DB Transfer (HOOPP/OMERS)

Post by brucecohen »

The imaginary surplus simply is not real money but a difference in actuarial assumptions. CV is the approximate lump sum needed now to fund the pension you've been promised by HOOPP. The key factor in that calculation is how much the money is expected to earn between now and retirement. The lower the projected interest rate, the more money needed today. These interest rates are regulated and, per the link I provided, are now around 1.3%. This is based on average yield for long-term Government of Canada bonds. Assuming ~1.3%, you would now have to invest approximately $110,000 to, at retirement, be able to create an income stream equivalent to what HOOPP promised. OMERS believes they can average more than 1.3% and thus be able to fund a comparable income stream with less money today. Again, the lower the assumed interest rate, the more needed today and the higher the assumed interest rate, the less money needed today.
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Re: DB to DB Transfer (HOOPP/OMERS)

Post by SoonRetired »

I know this is an older question, and I'm late to the discussion, but I made a similar transfer in 2015. I had long service in the HOOPP plan (over 24 years) and transferred to an OMERS employer when I was over age 50.

I have a lot of detail here - I apologize if it is too much.

I worked in the pay/benefits field so I was familar with the main concept of the Ontario MOPPS transfer agreement. From past conversations with plan staff, I had heard from plan advisors in Toronto that a MOPPS transferring-in member could only get their old plan's service recognized in the new plan to the extent that there was enough money/value in the old plan to fund all of it.

I then asked, if the old plan's value was higher, then the transferring member must get the excess, right?
He said no, it stays in the old plan and the member has no entitlement to it - this is how the MOPPS plan is designed.

This seems to be the situation Pension12345 was placed into, and it seems a bit unfair to me. The commuted values of DB pensions have skyrocketted (similar to the value of bonds) over the last 20+ years, and since the member is entitled to the Defined Benefit, in my opinion he/she should also be entitled to the full value of the CV under most or all circumstances.

So when I looked into the all of the options of my transfer in 2015 (besides the MOPPS reciprocal agreement) I discovered that I could buy back (not transfer-in) past pension service with OMERS using my commuted value held by HOOPP.

I was unfamiliar with the rules regarding historical PA comparability, but in my case the yearly PAs with my HOOPP service years were higher that they would be if I was with OMERS, so I had no issues with PSPAs.

The other issue was that I received no salary history in the new plan - I just received 24+ years of service and a salary history equal to my new salary at day #1 of my new job. If the service was acquired using the MOPPS transfer, I would have also transferred-in my past years' salary history, which would be available for a "best 5 years" calculation if I retired less than 5 years after starting the new job.

As I suspected, when I did the math there was lots of excess CV in HOOPP vs. the money requried to acquire the service years in OMERS, for 2 reasons...
1) My new job's day #1 salary was a little lower than my old salary, so the buy-back years were priced at the new, lower salary, and
2) I understand the actuarial assumptions used to value CV's are more "pessimistic" that those used to value a buy-back, since a member exitting a plan becomes 100% resposible for all future risks, where a receving pension plan has an operating period in the future to address potential funding issues with members entering a plan. I'm not an actuary, but I believe this is the jist of it...

The punchine - I was able to get service of 24+ years in OMERS for approx 45% of the CV I had in HOOPP, and HOOPP sent me a giant cheque (all taxable in 2015) = the difference between the CV and the money OMERS received.

One other issue was that HOOPP's plan text did not specifcally forbid this excess CV payout - I have discovered that, for example, the OPTrust plan recently amended their plan text to disallowed this from occurring, and I think OMERS has also disallowed this - these plans limit CV transfers to only the value of pension service acquired in a new plan, with no right to the excess value for the member.

I did contact the Ontario Financial Services Commission at one point during my process, and I said that I was not happy with the information and support provided by HOOPP and OMERS - I said that if I had not researched this issue myself, no one at either pension plan would offer this option to me. He was more generous in his opinion and thought they would have, but since I had done my own advance work I didn't need to get my "hand held" by HOOPP or OMERS staff.

I can see from Pension12345's comments that this didn't happen, and in my opinion the HOOPP and OMERS staff were wearing "blinders" and only considered the MOPPS transfer provisions for Pension12345.

I still believe a "Pension Benefits Act" transfer can be performed between HOOPP and OMERS, with the 5 years Pension12345 has they can be acquired for $75,000, and should also get the excess CV of $35,000 (taxable in year received).

Pension12345 - If HOOPP/OMERS cannot explain this to your satisfaction, threaten to contact the Ontario Financial Services Commission - that might get their attention and inspire them to explain this option.

Good luck...
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Re: DB to DB Transfer (HOOPP/OMERS)

Post by Peculiar_Investor »

Welcome to FWF and thank you very much for the detailed posting.
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Re: DB to DB Transfer (HOOPP/OMERS)

Post by Eclectic12 »

Mordko wrote: 06 May 2017 12:50 Not sure a person in his 30s is particularly "lucky" to have a DB pension. Someone in his 50s - very much so.

Younger people get screwed up by DB pensions in two significant ways:

1. High likelihood of quitting DB pension before maturity. This will penalize the holder.

2. The way they reduce RRSP room disadvantages younger people.
Actually, both are YMMV.

For #1, getting 6% of earnings plus growth paid out beat when leaving beat the employees who started two weeks after me. At my level, they received no pension at all (i.e. no company contributions, no forced savings, no growth). The managers and above were slightly better off as they received 2% of salary plus whatever growth they racked up using four MFs.

Given how many in this age group who had the attitude that "retirement is a long way off so no need to save for it now" - the forced savings benefited a a large number. Last article I saw, a surprisingly large number were not participating in employer matching plans - even when it was spelled out that the employer was doubling their money.


For #2, a co-worker thought the same way where he was intentionally skipping the DB pension as long as possible. I suggested he run the numbers to compare. When he did, his numbers said that going his own way would mean running out of money in six years where the pension would at minimum pay him the same amount for ten ... or if he lived longer, more.


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Re: DB to DB Transfer (HOOPP/OMERS)

Post by Eclectic12 »

Mordko wrote: 06 May 2017 15:39 Hmm... I received no PAR, having quit at 47. Apparently there are never any PARs with the pension scheme which I quit - at least thats what I was told by HR ...
The PAR is comparing the loss of RRSP contribution room to the CV being paid out. If like me, the lost RRSP contribution room from the PA is > than the CV then it will restore the difference. It sounds like for the company you left, it was the opposite.

It seems weird that there never was a PAR for all employees quitting ... unless no one quits or is fired with little time at the company and young?

Mordko wrote: 06 May 2017 15:39 ... As far as I can judge (not being an expert), the key factor of success with DB pension is retiring from it rather than quitting. Salaries go up above the rate of inflation and DB only takes account of the final years when calculating the pension. People who are young are unlikely to be there till the end ...
Sure ... but then again, for some the forced savings beats what they would have done on their own. Or better investment management, economy of scale, lower contributions rates or decision making (ex. why both with a plan where the employer doubles the money?).


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Re: DB to DB Transfer (HOOPP/OMERS)

Post by Eclectic12 »

cashinstinct wrote: 07 May 2017 06:24 ... DC plan might be good in theory, but in my limited experience, employers tend to invest less in contributions in DC plan (paltry 3-5%?), compared to what they might be forced to pay for DB plan (10%+ per year).
It can be far worse ... for the company I joined in 1997, there was a DB pension for my level with combined contribution rates a bit under 12% a year. Joining two weeks after me meant no pension with zero employer contributions. Managers and above had a DC pension at 2% a year with four MFs to invest in.

The other challenge for a DC pension is where it is optional. Several studies show that automatic enrollment where the employee has to opt out was the factor that increased participation. Running education sessions pointing out that employer was doubling the $$ made no difference to the participation rates.

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Re: DB to DB Transfer (HOOPP/OMERS)

Post by Eclectic12 »

brucecohen wrote: 07 May 2017 11:50 True in the private sector. Not so true in the public sector. Frankly, this aspect of your discussion is rather pointless as few private sector employers today even offer DB membership to new hires ... By and large the only young/younger people entering DB plans today are public employees and those working in unionized old economy industries.
Odd then that TD bank would launch a new DB pension in 2009 that is solely funded by the employer.
https://www.td.com/corporate-responsibi ... /index.jsp

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Re: DB to DB Transfer (HOOPP/OMERS)

Post by Eclectic12 »

Mordko wrote: 18 May 2017 12:22 ... Basically, they won't tell me what the PAR is until 2023. Apparently they asked the actuaries and this was the response. Is this correct? Does not seem to align with the information on the CRA site which requires for the PAR value to be provided within 60 days of reporting commuted value (that happened in March).
If you left in 2017 this sounds wrong. Longest I had to wait for the PAR was two years. I the company/pension in 1997 with the CV paid the same year. The PAR paperwork showed up in 1999. Part of the delay was because the PAR was a new thing that had just been introduced and part was because of the Ottawa ice storm.

The second round of PAR from leaving a second DB pension in 2003 I seem to recall having the PAR numbers in about eight months.


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Re: DB to DB Transfer (HOOPP/OMERS)

Post by Eclectic12 »

Mordko wrote: 31 May 2017 09:33 To close the loop... I sent them a formal letter. Yesterday the pension administrator got back to me with the PAR value. As expected the value is zero.

This whole saga left me wondering why they resisted. Well, suppose nothing I can do except sit and hope they stay solvent.
Makes no sense to resist as they have all the numbers and seem to have it right about there being no PAR.
Seems far more efficient to just send it out on time.


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