A 10-year look at multiemployer pension plans shows most of them remaining financially stable, with increased funding levels and assets, said a report released Tuesday by the International Foundation of Employee Benefit Plans and Horizon Actuarial Services. Still, demographic challenges remain, the report found.
The report looks at demographics, cash flows and investments for the defined benefit and defined contribution plans from 2004 through 2013.
Jason Russell, consulting actuary with Horizon Actuarial Services, said in a statement that the 10-year period “brought major changes to the multiemployer plan landscape,” including the Pension Protection Act of 2006, investment losses, economic turmoil and funding relief. “Strong investment returns combined with trustee actions have allowed most multiemployer pension plans to improve their funding levels in recent years,” Mr. Russell said in the statement.
As of year-end 2013, 1,349 of 1,387 multiemployer pension funds were financially solvent. Total assets of $460 billion were up from $400 billion in 2012. The plans serve 10.4 million participants and beneficiaries.
Investment returns were volatile during the survey period, going from a median investment return of -23.5% in 2008 to double-digit positive returns in four of the five years from 2009 through 2013.
Plan trustees have taken significant action to improve plan funding levels. As of Dec. 31, 2013, the median funding percentage was 86%, up from 68% in 2008.
“The higher investment returns and increased funding levels of plans are good signs, but plans on the whole are becoming more mature,” Mr. Russell said in the statement. “When you look at demographics and net cash flows, it's clear that plans are aging and tilting toward more inactive vs. active members.
“Trustees may want to evaluate their funding and investment strategies to make sure they are in line with their plans' demographics.”
The report, “The Multiemployer Retirement Plan Landscape: A Ten-Year Look (2004-2013),” can be found on the IFEBP's website.