Multiemployer pension funding levels experience slight uptick overall, but poor plans grow poorer

Milliman has released the results of its Spring 2017 Multiemployer Pension Funding Study, which analyzes the funded status of all multiemployer pension plans. As of December 31, 2016, these plans have an aggregate funding percentage of 77%, a 1% increase since June 2016. During that six-month period, the market value of assets increased by $17 billion while pension liabilities increased by $13 billion, resulting in a $4 billion-decrease in the aggregate funding status shortfall.

But results vary by plan; while non-critical plans experienced an aggregate funding percentage of nearly 85%, the funding level for critical plans is under 60%. The gap continues to widen between critical and non-critical plans. While the funding percentage of healthier plans has increased slightly, critical plans have seen no appreciable increase. Persistent strong returns would be needed to see any appreciable improvement in funded status.

A closer look into how contributions are distributed shows that plans facing severe funding challenges only spend 38 cents of each contribution dollar on new benefit accruals, while 50 cents of every dollar goes to pay down funding shortfalls. Healthier plans spend 56 cents per contribution dollar on benefit accruals and 32 cents on funding shortfalls. The remaining 12 cents in both scenarios is spent on expenses.

This is the first of three pension funding studies Milliman will be releasing this week. To view the complete study, click here. To receive regular updates of Milliman’s pension funding analysis, contact us here.

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