Study Includes Good News for Multiemployer DB Plans
Multiemployer defined benefit plans show stability and then some. A recent study reports they are enjoying sustained recovery from the Great Recession.
In “The Multiemployer Retirement Plan Landscape: A Ten-Year Look (2004-2013),” the International Foundation of Employee Benefit Plans and Horizon Actuarial Services, LLC, conclude that by the end of 2013, not only were multiemployer DB plans’ plan funding levels close to recovery from the recent recession, they also were financially stable and their assets were growing
And as if the recession wasn’t enough, other developments affected multiemployer DB plans as well, notes Horizon Consulting Actuary Jason Russell in a press release. Among them: the enactment of the Pension Protection Act of 2006 and investment losses.
Highlights of the findings regarding multiemployer DB plans as of New Year’s Eve 2013 include the following.
- Ninety-seven percent of the 1,387 multiemployer DB plans were financially solvent.
- Multiemployer DB plans had total assets of $460 billion, $60 billion more than by year’s end in 2012.
- The plans served 10.4 million participants and beneficiaries.
- Plan investments had a median investment return in 2008 of -23.5%, but median investment returns were in the positive realm by double digits in four of the five subsequent years.
- Median funding levels at the advent of 2008 were 89%; after the Great Recession worked its magic, that fell to 68% as 2009 was about to dawn. But five years later, that level had more than rebounded to 86%.
But the report should not be read in rose-colored glasses — it strikes a note of caution as well. The IFEBP and Horizon observe that demographics are not on multiemployer DB plans’ side. The report says that at the close of 2004, the median ratio of active participants in the plans to inactive participants was 1:1; a decade later, it’s 6:10. Russell warns that multiemployer DB plans will find it harder to improve their funding as plans — and their participants — age, and suggests that one step trustees could take in response to that trend is to evaluate funding and investment strategies.