The aggregate funding ratio of multiemployer pension plans was at 81% as of June 30, down from 83% at the end of 2017, according to a Milliman report.
Milliman's Fall 2018 Multiemployer Pension Funding Study attributed the drop in funding ratio to lackluster performance and flat investment returns through the first half of 2018. Milliman's simplified portfolio of 45% domestic equities, 20% international equities and 35% U.S. fixed income returned about 0.2% for the first half of the year, far below the 3% to 4% assumed rate of return for most plans, and also in stark contrast to the 16% aggregate return experienced in 2017.
"We've said it before and we'll say it again: The funded status of multiemployer pensions is primarily driven by investment performance," Kevin M. Campe, a principal and consulting actuary at Milliman and co-author of the report, said in a news release announcing the results.
"As Congress explores potential solutions to improve the solvency of these pensions, plans need to continue looking for ways to reduce risk exposure and protect their members in the case of a potential stock market downturn," he said.
As of June 30, 355 of the plans studied had a funding ratio at or above 100%, while 258 plans had a funding ratio at or below 70%.