Nearly a third of multiemployer pension plans are more than 90% funded but the aggregate funding ratio dropped to 74% from 81% in the last six months of 2018, according to the Spring 2019 Multiemployer Pension Funding Study released Wednesday by Milliman.
The study also found that about 10% of underfunded plans — the 123 plans designated critical and declining — show little hope of recovery without help.
The study analyzed the funded status of all U.S. multiemployer pension plans. The drop in the aggregate funding level in late 2018 was largely due to poor investment returns, with average returns of about -5%, compared to investment return assumptions of 6% to 8%. The overall funding shortfall for those plans increased by $51 billion during the last six months of 2018, according to the study.
Compared to a market low point in March 2009, the plans were much healthier at the end of 2018. Of the 1,251 plans covering 10.5 million participants in the study, 383 are at least 90% funded and another 288 plans are 80% to 90% funded.
"Despite 2018's investment losses, it appears that the majority of multiemployer plans are positioned to absorb that experience and improve in the future," study co-author Ladd Preppernau, a principal and consulting actuary at Milliman, said in the release. For the severely underfunded plans, "even stellar asset performance is unlikely to right the ship," he said. "Most of these plans will need outside help from lawmakers or others in order to prevent insolvency."