The estimated aggregate funding ratio of multiemployer defined benefit plans in the U.S. dropped to 79% as of Dec. 31, down from 91% at the end of 2021, according to a study from Milliman.
The drop in funding ratio was largely the result of significant investment losses during 2022, according to the study. Both the Russell 3000 index and Bloomberg U.S. Aggregate Bond index posted double-digit negative returns during the period at -19.2% and -13%, respectively.
Investment returns were poor enough that the funding ratio dropped despite the first wave of special financial assistance funding approved by the Pension Benefit Guaranty Corp. under the American Rescue Plan Act of 2021.
In 2022, a total of 35 multiemployer plans received $9 billion in special financial assistance. The study notes also that an additional $37 billion of SFA assistance was paid in January. If those amounts had been paid before the end of 2022, the aggregate funding ratio would have reached 84% as of Dec. 31.
"The SFA has been vital for multiemployer plans in dire financial condition; however the underlying conditions for these plans have not changed," said Timothy L. Connor, a principal at Milliman and co-author of the study, in a news release Monday. "They continue to be very mature, have high negative cash flow, and depend highly upon asset performance. Investment returns will continue to be a driving factor to sustain these plans for the long term."
The complete study is available on Milliman's website. It is based on publicly available IRS Form 5500 data filed by more than 1,200 plans.