Multiemployer Pension Funding Took Hit in 2nd Half of 2015

The aggregate funding status of the country’s multiemployer pension plans dropped 4 percent in the second half of 2015, according to a report by Milliman.

[See the report here.]

The aggregate funding level now sits at 75 percent; the funding drop was due to flat investment returns.

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“Multiemployer plans continued to be stuck in a rut in 2015,” said Kevin Campe, principal and consulting actuary at Milliman and co-author of the report, in a news release. “Currently, at least 76 plans with $28 billion of shortfall are projected to be insolvent at some point. These plans may be beyond help at this point, and several more may be headed in this direction.”

As of Dec. 31, 192 plans were more than 100% funded with an aggregate surplus of roughly $4 billion, down from 279 plans with an aggregate surplus of roughly $6 billion as of June 30.

Also as of Dec. 31, 264 plans were less than 65% funded, with an aggregate shortfall of $77 billion, accounting for more than half of the $151 billion aggregate shortfall for all multiemployer pension plans, and up from 214 plans as of June 30.

For the funding ratio to remain at 75% at the end of 2016, the pension funds would have to achieve an aggregate 5.5% return in 2016, Milliman estimated. Returns of 11% or more for the year are needed to return to the 79% level seen as of June 30, 2015. A flat return could lower the funding ratio to approximately 72%; a -5% return could drop the funding ratio below 70%. For the first month and a half of 2016, the assessed plans returned roughly -3% in aggregate, Milliman noted.

Read the full study here.