February 21, 2017
Multiemployer Retirement Plan Funding Levels Remain Steady
Demographic and Investment Challenges Remain for the Future
Brookfield, Wisconsin — A new report, The Multiemployer Retirement Plan Landscape: A Ten-Year Look (2005-2014), provides a 10-year snapshot of how multiemployer retirement plans have withstood a decade of changing demographics and market volatility.
Conducted by the International Foundation of Employee Benefit Plans and Horizon Actuarial Services, LLC, the annual report analyzes key trends in demographics, cash flows and investments for defined benefit (DB) and defined contribution (DC) plans. Data was collected using publicly available information from Form 5500 filings, with 2014 being the most recent information available at the time of the study.
Key Multiemployer Defined Benefit Pension Plan Findings:
- Plan Numbers: At the end of 2014, there were 1,380 multiemployer DB plans — 1,334 plans were financially solvent, and 46 were insolvent and receiving assistance from the Pension Benefit Guaranty Corporation (PBGC). The plans had assets of more than $480 billion, and they covered 10.5 million participants and their beneficiaries.
- Plan Investments: Investment returns over the past decade were volatile — marked by the financial collapse in 2008, when the median investment return for multiemployer DB plans was -23.5 percent. The median annualized return was about 5.6 percent over the 10-year period from 2005 through 2014. The 2014 median investment return was 6.3 percent, slightly below the 7.5 percent median return assumption.
- Plan Funding: As of December 31, 2014, the median funded percentage was 85.9 percent (based on the market value of assets). This was a significant improvement over the median funded percentage at the end of 2008, which was 67.6 percent and approached the median funded percentage of 88.7 percent from the beginning of 2008. The increased funding allowed more plans to enter the "green zone" under the Pension Protection Act (PPA). Sixty-one percent of funds were in the green zone at the end of 2014.
- Participant Ratios: Over the past decade (2005 through 2014), few plans saw increases in the number of active participants, while the number of inactive participants continued to grow. Looking over the last 10 years, in 2005 the ratio of active participants to inactive participants was 9:10 — at the end of 2014 the ratio had declined to 6:10.
"Although the active-to-inactive participants ratio has remained fairly steady over the past few years, it is still considerably less favorable then it was prior to the 2008 recession," explained Jason Russell, consulting actuary, Horizon Actuarial Services, LLC. "As plans continue to mature and their cash flows become more negative, they are relying on their investment returns to sustain them into the future."
Key Multiemployer Defined Contribution Pension Plan Findings:
- Plan Numbers: At the end of 2014, there were 1,102 multiemployer DC retirement plans, with total assets of more than $130 billion. These plans covered 3.8 million participants and beneficiaries. The majority of plans — 80 percent — were offered in tandem with a DB plan.
- Plan Investments: In 2014, these DC plans saw a median investment return of 5.6 percent. Rates of return were volatile over the last decade. The median annualized return from 2005 to 2014 was 5.3 percent.
- Account Balances: The average account balance for a participant in the median multiemployer DC plan was about $38,200 at the end of 2014, up from about $36,100 at the end of 2013. Average balances have grown over the past decade, along with contributions and investment returns.
"Multiemployer DB and DC plans provide retirement security to millions of workers and their families," said Julie Stich, CEBS, associate vice president of content at the International Foundation of Employee Benefit Plans. "This annual report sheds light on the actions being taken to ensure the long-term stability of these funds while illustrating challenges for the future."
For the fourth year in a row, Horizon Actuarial Services, LLC, and the International Foundation of Employee Benefit Plans have partnered on The Multiemployer Retirement Plan Landscape: A Ten-Year Look, an annual benchmarking report on multiemployer pension and retirement plans.
For more information on The Multiemployer Retirement Plan Landscape: A Ten-Year Look (2005-2014), visit www.ifebp.org/MultiemployerRetirement.
International Foundation of Employee Benefit Plans is the premier educational organization dedicated to providing the diverse employee benefits community with objective, solution-oriented education, research and information to ensure the health and financial security of plan beneficiaries worldwide. The Foundation has more than 33,000 multiemployer, corporate and public sector members representing over 25 million lives. For additional information, visit www.ifebp.org.
Horizon Actuarial Services, LLC is a leading consulting firm specializing in providing innovative actuarial solutions to U.S. multiemployer benefit plans. Horizon Actuarial serves roughly 100 pension and welfare benefit plans from various industries, including construction, trucking, hospitality, entertainment, retail food, and communications. Horizon Actuarial helps clients address an extensive range of issues, from pension plan implementation, to health and welfare fund reserve analysis, and everything in between. With Horizon Actuarial's experience comes an understanding of the unique dynamics of multiemployer plans, keeping both labor and management well informed and well equipped to navigate the challenges facing their plans.
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