The Multiemployer Pension Reform Act of 2014 (MPRA) changes how certain employer contributions are handled when calculating withdrawal liability payment amounts. Plan administrators should review their systems and procedures regarding invoicing employees and/or retaining employer contributions so they can isolate certain contribution amounts excluded when calculating withdrawal liability. Milliman consultant Nina Lantz provides more perspective in this paper.
Milliman today released the results of its Spring 2015 Multiemployer Pension Funding Study (MPFS), which analyzes the cumulative funded status of all U.S. multiemployer pension plans. These pension plans experienced little movement last year, slipping slightly from an 81% funded status at the end of 2013 to an 80% funded status at the end of 2014. As was the case in 2013, many mature plans are still struggling to recover from the financial crisis.
While the market value of assets for all multiemployer plans increased by $7 billion, the liability for accrued benefits outpaced these gains, growing by $12 billion and resulting in an increased shortfall of $5 billion.
People assume that the stock market recovery would be enough to push these multiemployer plans back to where they were in 2007, but it’s not that simple. Liabilities have been growing at 7.5% per year on average, which complicates a full recovery.
Approximately 15% of multiemployer pension plans are less than 65% funded as of December 31, 2014, and over half of the $117 billion aggregate shortfall for all multiemployer plans is attributable to these plans. On the positive side, about 22% of all multiemployer plans are over 100% funded.
The study notes that the recently enacted Multiemployer Pension Reform Act of 2014 provides new tools to the Trustees of the most severely underfunded multiemployer plans.
To download a copy of the entire study, click here.
Milliman today released the results of its inaugural Multiemployer Pension Funding Study (MPFS), which analyzes the cumulative funded status of all U.S. multiemployer pension plans. In 2013, these pensions were buoyed by strong investment performance—a $45 billion reduction in the funding deficit, which represents a 9% improvement in funded status.
On an aggregate basis, 2013’s strong market performance helped these plans return to funding levels similar to what they saw ahead of the global financial crisis. For plans in need of financial recovery, achieving full funded status will require returns in excess of assumed rates of return. More than half of all plans will need to earn an average of 8% or more per year over the next 10 years to reach 100% funding.
Not all of these multiemployer plans are suffering the same degree of underfunding. Our analysis found that 22% of these plans are better than 100% funded at the end of 2013. At the other end of the spectrum, 15% of these plans are less than 65% funded.
Plan maturity is a major contributor to these plans’ ability to respond to poor funded status, and the level of maturity can be measured by the ratio of active-to-total participants. Between 2002 and 2012, the overall percentage of active participants in these plans fell from 48% to 37%.
To download a copy of the entire study, click here.
Multiemployer plan sponsors will find value in this 2012 calendar of key administrative dates and deadlines for calendar-year multiemployer defined benefit plans.
Along with downloading the calendar, be sure to follow us on Twitter @millimaneb where we Tweet about upcoming important dates for plan sponsors.
We’ve previously touched on the changes introduced by the Financial Accounting Standards Board (FASB) relating to multiemployer plan disclosures. The new standard, Subtopic 715-80, requires additional disclosures by employers who contribute into multiemployer pension plans. For publicly traded entities, the changes must be complied with for fiscal years ending after December 15, 2011. For many employers, this means now is the time to begin gathering the newly required information.
The new requirements ask employers to provide a lot of detail concerning the pension plans they contribute to. Some of the information will be readily available within the employer’s own records, such as the amount of contributions made to each “significant” plan and to all plans in the aggregate, as well as the expiration dates of collective bargaining agreements. However, much of the rest needs to be gathered with a little bit of help from the plans themselves.
Most if not all of the rest of the information, however, has likely already been provided by the plans through various notices. Employers should be looking to all pieces of correspondence they have received from the pension fund office. Annual Funding Notices and 104(d) Notices are likely to be the most helpful, as these should contain information on the projected Zone Status and whether or not the employer’s contributions represent more than 5% of all contributions to the plan.
The new requirement does not involve only data, however. Employers will need to provide some general narrative about the nature and risks involved with multiemployer plans. They’ll also need to disclose any material events that might affect comparability of periods reported. Lastly, there is judgment involved, as employers must decide what constitutes a “significant” plan.
The example provided in Accounting Standards Update 2011-09 is helpful and thorough, and sponsors may find additional helpful information here.
The latest issue of Multiemployer Review outlines key compliance issues as the year draws to a close. These considerations include:
- Most multiemployer plans were affected by the Pension Protection Act and the 2008 Worker, Retiree, and Employer Recovery Act, both of which included required and discretionary plan amendments.
- Plan sponsors may need to distribute a number of annual notices and benefit statements.
- A new IRS form requires completion.
Read more here.
The latest Client Action Bulletin looks at the Financial Accounting Standards Board’s new disclosure rules for employers participating in multiemployer plans. The CAB is available here.
The latest issue of “Multiemployer Review” is now available. It includes two articles:
- The Financial Accounting Standards Board (FASB) adopts a new disclosure requirement for employers participating in multiemployer plans
- Health reform: A roundup of recent developments
Check it out by clicking here.