Given all the negative headlines about the worst-funded, collectively bargained, multiemployer plans, it might be hard to believe that most are posting funding levels that rival defined benefit plans in the corporate sector.
More than two-thirds of plans are in the "Green Zone," the healthiest level of funding status as designated by the Pension Protection Act of 2006.
Green Zone status requires a minimum funding level of 80 percent—and 65 percent of multiemployer plans meet that criterion. For all plans, the average funding level is 88 percent, according to a new survey Segal Consulting, a New York-based benefits consultancy.
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In the construction industry, 72 percent of plans are in the Green Zone, and in the entertainment industry, 71 percent are in the healthiest funding zone.
"While most plans have not yet fully recovered from the impact of the market crash during the Great Recession, they are holding their own through a combination of increased contributions, benefit modifications, and investment performance," said David Blumenstein, the national director of multiemployer consulting for Segal.
The review of Segal's 400 multiemployer plan clients with a "Zone" status shows that the healthier plans are also benefiting from a higher percentage of active participants.
Green Zone plans have an average of 42 percent of active participants, compared to 25 percent for Red Zone plans.
For 2015 calendar year plans, 59 are in the Red Zone, meaning they are less than 65 percent funded, and 20 of those plans have been classified as "critical and declining," a new designation created under the Multiemployer Pension Reform Act of 2014, which allows plans projected to go insolvent in 15 years to clawback promised pension benefits from existing retirees.
The transportation industry is home to the greatest level of stressed plans, as 57 percent of plans in the Segal universe are in Red Zone status. In the retail trade and food industry, 40 percent of plans are in Red Zone status, as are 37 percent in the service industry.
In 2008 the average funded status for all plans was 97 percent. In 2009 it dropped to 85 percent.
Almost 10 percent of plans are funded at 110 percent, and 22 percent are funded between 90 and 99 percent, a greater percentage than in any other decile.
And 10 percent of plans are funded below 60 percent, according to Segal.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
