A new report details the stresses to which multiemployer defined benefit pension plans (MEPPs) are subject, and analyzes how much effect each different type has on plans that are healthy and plans that might not be so healthy.

The Society of Actuaries released its report “Multiemployer Plan Stress Metrics,” which looks at data it says are two key metrics:

• Previous Benefit Cost (PBC)

• Previous Benefit Cost Factor (PBCF)

PBC “measures the annualized cost per current active participant to pay off a plan’s unfunded liability,” the report said, adding that it is “calculated by dividing a plan’s unfunded liability amortized over 15 years by the number of active participants in the plan.”

PBCF, which completes the picture, “fills the gaps left by the PBC. It compares the annual cost of paying off unfunded liabilities to the cost of funding the current year’s benefit accruals.”

Financial stress on the system of MEPPs, said the report, affects approximately 10 million participants and 200,000 contributing employers, and is not just a concern to them but to society as a whole.

And regardless of how MEPP assets and liabilities are measured, it said, “[t]he aggregate level of underfunding in the system is significant...”

Among other results, the report found that stable plans “in terms of financial stress posed by unfunded liabilities” gained additional stability between 2009 and 2013, and looked as if they were well positioned to satisfy their obligations over the long term.

However, financially stressed plans, perhaps predictably, went the other way; the report said that this was “likely a result of decreasing numbers of active participants as manufacturing jobs and unions both experience declines.”

In fact, plans with the highest stress levels are suffering most as their stress levels increase, while plans with the lowest stress levels are improving.

The great majority of multiemployer pension plan participants, the study said, are in plans that have higher annualized costs of previously accrued benefits than the costs of current benefit accruals and administrative expenses taken together.

And, looking at that period of 2009–2013 again, “[t]he annualized costs of previously accrued benefits make up well over half of annualized plan costs.”

Both PBC and PBCF plans, it said, are sensitive to the return on investment.

The lower costs associated with high returns are a result they hope for, but should returns be low, plans—particularly those that are already stressed—could find themselves hard pressed to cope with the results.