Nearly two-thirds of multiemployer pension plans are still 80% funded or better, but those plans considered critical and declining and projected to be insolvent within the next 20 years are burning through their assets faster, according to Segal Consulting's latest Survey of Plans' Zone Status released Monday.
The better-funded plans repeated 2018's average funding level of 65% despite average negative returns of -3% in 2018, due to asset smoothing that spreads out the effects over five years, Segal found in the client survey, which covers 200 plans with calendar years starting Jan. 1 that have a collective $103 billion in assets.
Nearly 60% of those plans saw their funding ratio drop 1 percentage point in the first half of 2019, to 86%. Using the market value of assets, the decline was 8 percentage points to 81%, from 89% in 2018.
For critical and declining plans, the burn rate — the asset decline as a percentage of total assets without regard to investment income — was higher than 2018, rising to 19% from 16% in 2018.
The annual survey "shows that healthy plans continue to grow, and unhealthy plans were not helped by market volatility at the end of 2018," said David Brenner, senior vice president and national director of multiemployer consulting at parent company The Segal Group, in an email. "No one caught a break here. The government still needs to establish appropriate policies to stabilize the (Pension Benefit Guaranty Corp.) and assist the participants of plans that are in trouble."