Skip to main content

You are here

Advertisement

Multiemployer Plans’ Underfunding Worsens, Study Says

There’s bad news concerning the funded status of U.S. multiemployer pension plans, Moody’s Investors Service says. According to Pensions & Investments, Moody’s reports that underfunding was worse by year’s end in 2013 than it had been one year before.

Moody’s says that the plans were underfunded by almost $318 billion, $32 billion more than in 2012. It attributed the results at least in part to asset growth lagging behind growth in pension obligations. Moody’s also cited the continuing after-effects of the Great Recession, saying that it erased one-quarter of multiemployer plan assets, which, in turn, resulted in funding slightly exceeding 50% as well as heightened the difficulty in assets meeting obligations.

Moody’s Senior Vice President and Senior Accounting Analyst Wesley Smyth outlined some of the bitter wages of the underfunding, including:

  • increasing debt at some companies;
  • the prospect of future ratings downgrades;
  • small companies and those that are in weak positions leaving the multiemployer plans in which they participated, increasing the stress on companies that remain in the plans; and
  • plan sponsors restructuring liabilities or leaving the plans.
In the study, Moody’s looked at 124 multiemployer pension plans.