The aggregate funding ratio of multiemployer defined benefit plans in the U.S. dropped to 82% as of June 30 from 85% at the end of 2019, according to a study from Milliman.
The weaker funded status increases the aggregate funding shortfall of multiemployer pension plans by $26 billion, the study found.
Milliman estimates that the pension plans' investment return for the first half of 2020 was about -1.3%, up from an estimated year-to-date return of -13.4% at the end of the first quarter. The investment returns were based on a simplified portfolio made up of 45% U.S. equities, 20% international equities and 35% U.S. fixed income investments.
The extreme market movements over the past six months have had a big negative impact on multiemployer plans whose measurement, or fiscal year-end, date is March 31, said Nina Lantz, a principal and consulting actuary at Milliman, in a news release.
"Measurement dates matter," Ms. Lantz said. The 70 plans in the study with a March 31 fiscal year-end date "will complete their annual valuations and zone certifications when 2020 asset values are their lowest for the year so far," she said, adding that it "will affect their funding position and zone status, despite the current market recovery in Q2 2020."
Zone status and zone certifications refer to the three funding categories or zones of plans as established under the Pension Protection Act. Those plans in the green zone are healthy with a funding ratio greater than 80%, those in the yellow zone are endangered with funding ratios between 65% and 79%, and those in the red zone are critical with funding ratios less than 65%.