The aggregate funded status of U.S. multiemployer pension plans was 79% as of June 30, relatively unchanged from the end of 2014 when it was 80%, but still below its pre-recession levels, said a report from Milliman.
Prior to the 2008 financial crisis, multiemployer pension plans were more than 85% funded, according to Milliman.
Assets declined slightly in the first half of 2015 to $479 billion as of June 30, down 0.21% from Dec. 31. During the same period, liabilities rose 1.17% to $604 billion, Milliman estimated.
“Multiemployer pension plans have not experienced the kind of equity returns hoped for this year, and recent stock market volatility has only compounded the funding challenges,” said Kevin Campe, principal and consulting actuary at Milliman and co-author of the report, in a news release. While funding levels have improved from their early 2009 low, liabilities have been growing 7.5% a year on average, making full recovery from the 2008 financial crash difficult.
For the funding ratio to remain at 79% at the end of 2015, the pension funds would have to achieve a 3% return for the second half of 2015, Milliman estimated. Double-digit returns could drive the funding ratio over 87%. A -7% return could drop the funding ratio below 72%.
As of June 30, 279 plans were more than 100% funded with an aggregate surplus of roughly $6 billion, unchanged from Dec. 31. However, the shortfall for plans less than 65% funded rose 8.33% to $65 billion during that period.
Results in Milliman’s report were derived from pension funds’ Form 5500 filings; nearly 1,300 multiemployer pension funds were assessed.
The report noted that more mature plans, whose benefits payments and plan expenses often outweigh contributions, have a harder time recovering from poor returns.