U.S. multiemployer defined benefit plans are approaching full funding thanks to strong investment returns in 2024 adding to government assistance, according to a Milliman study.
The estimated aggregate funding ratio of multiemployer pension plans in the U.S. jumped to 97% as of Dec. 31, up from 89% the year before, according to the study.
Milliman cited estimated investment gains of 10% based on its assumed portfolio for the increase in funding ratio for the year, along with continued special financial assistance funding approved by the Pension Benefit Guaranty Corp. under the American Rescue Plan Act of 2021.
That assistance was the primary driver for the equally dramatic gains seen in 2023 when the estimated funding ratio had increased from the aggregate funding ratio of 79% as of Dec. 31, 2022.
As of year-end 2024, 102 U.S. multiemployer plans have received a total of almost $70 billion in SFA contributions, which includes $16 billion in 2024 alone. According to Milliman, without that assistance, the aggregate funding ratio among plans at the end of 2024 would have been about 89%.
Timothy Connor, a principal and consulting actuary at Milliman and co-author of the study said in a Feb. 20 news release the strong returns seen particularly in the first and third quarters of 2024 were responsible for bringing the aggregate funding ratio to the second-highest level since Milliman began conducting the annual studies in 2007.
“We now see more than half of all plans funded 100% or better as they continue their trend of upward improvement in funded percentage,” Connor said.
Specifically, 627 out of 1,193 multiemployer plans (or 53%) measured by Milliman show an estimated funding ratio of 100% or more, while 1,005 (or 84%) have funding ratios of 80% or more. On the other end of the spectrum, 85 plans (or 7%) are showing estimated funding ratios of 60% or less, many of which are likely eligible and expected to apply for SFA in the coming year.
As of Dec. 31, Milliman estimated a total of $795 billion in multiemployer pension plan assets, up from $720 billion the year before, while liabilities totaled $818 billion, up from $808 billion the year before.
The complete study is available on Milliman's website. Calculations are based on publicly available IRS Form 5500 data filed by nearly 1,200 plans.
