Milliman today released the results of its Fall 2019 Multiemployer Pension Funding Study (MPFS), which analyzes the funded status of all multiemployer pension plans in the United States. Between January 1 and June 30 of 2019, the aggregate funded ratio of multiemployer plans rose from 74% to 82% thanks to stellar asset gains for many of these plans. In fact, the estimated investment return for the MPFS was about 13.4% for the first six months of 2019, nearly double many plans’ annual investment return assumptions.
Over the first six months of 2019, the number of multiemployer plans that are 90% funded or better, climbed from 383 to 635—a 66% increase. However, for troubled plans, such as those in critical or critical and declining status, the rebound in funded status is not as pronounced despite the positive investment returns. This is primarily due to their maturity and negative cash flow positions.
The majority of multiemployer pensions had a great start to 2019, with many reaching pre-2008 funding levels. Troubled plans, however, have struggled to rebound fully, and may need to depend on legislation making its way through Congress to help fund their members’ pensions.
Milliman today released the results of its Spring 2019 Multiemployer Pension Funding Study (MPFS), which analyzes the funded status of all multiemployer pension plans in the United States. Between June 30, 2018, and December 31, 2018, the aggregate funded ratio of multiemployer plans dropped from 81% to 74% largely due to poor investment returns. In 2018, estimated average returns for MPFS plans were approximately -5% (compared to investment return assumptions of 6% to 8%), resulting in asset losses ranging from 11% to 13% below expectations. The overall funding shortfall for these plans increased by $51 billion during the last six months of 2018.
But despite the double-digit losses, the study found that, as of December 31, 2018, the majority of U.S. multiemployer plans are much healthier than they were at the market’s low point in March 2009. The MPFS includes 1,251 plans covering 10.5 million participants; nearly one-third—or 383 plans—are at least 90% funded and another 288 plans are funded between 80% and 90%. However, there are at least 123 “critical and declining” plans covering roughly 1.3 million participants that are likely headed for insolvency absent Congressional action.
Despite 2018’s investment losses, it appears that the majority of multiemployer plans are positioned to absorb that experience and improve in the future. However, for about 10% of plans, even stellar asset performance is unlikely to right the ship. Most of these plans will need outside help from lawmakers or others in order to prevent insolvency.
Milliman today released the results of its Fall 2018 Multiemployer Pension Funding Study (MPFS), which analyzes the funded status of all multiemployer pension plans in the United States. As of June 30, 2018, the aggregate funded ratio of these plans was at 81%, down from 83% at the end of 2017.
The drop in funded ratio is largely due to lackluster performance by investment returns, which were flat through the first six months of 2018. Milliman’s simplified portfolio earned about 0.2% for the first half of the year, well below the 3% to 4% assumed rate of return for most plans and in stark contrast to the 16% aggregate return experienced in 2017.
We’ve said it before and we’ll say it again: the funded status of multiemployer pensions is primarily driven by investment performance. As Congress explores potential solutions to improve the solvency of these pensions, plans need to continue looking for ways to reduce risk exposure and protect their members in the case of a potential stock market downturn.
As of June 30, 2018, 355 of the plans studied had a funded ratio at or above 100%, while 258 plans had a funded ratio at or under 70%. To view the complete study, click here.
To receive regular updates of Milliman’s pension funding analysis, contact us here.
Milliman today released the results of its Spring 2018 Multiemployer Pension Funding Study (MPFS), which analyzes the funded status of all multiemployer pension plans in the United States. As of December 31, 2017, the plans achieved an aggregate funded ratio of 83%, the highest since the market collapse in 2008; a decade ago, the aggregate funded ratio of all multiemployer plans stood at 85%.
While increases in plan contributions and reductions in benefits factored into these plans’ funding improvement, stellar investment returns were the primary driver of gains for the MPFS plans. The estimated 2017 calendar year investment return for our simplified portfolio was nearly 16%—more than double the assumption of most plans. Critical plans, however, were unable to capitalize on the sturdy investment returns due to the cash flow demands that hit less healthy plans.
While healthier plans benefited from better than assumed investment earnings, critical plans are sinking in quicksand and not able to benefit enough from strong investment returns. It’s been almost 10 years since the global financial crisis, and while healthier plans have gotten their funded status levels back to where they were then, critical plans have not.
Healthy plans have a funded ratio of 93%, compared with 90% a decade ago. Critical plans’ aggregate funded ratio as of year-end is mired at 60%, compared to 76% in 2008. A closer look at critical plans in the “red” or “deep red” zones show the contributions of mature plans (those with fewer active participants) are relatively small compared to the size of the plan’s assets and liabilities. The shortfall for red zone and deep red zone plans is expected to grow unless these plans experience superior asset returns, increased contributions, and/or benefit reductions.
Milliman has released the results of its Fall 2017 Multiemployer Pension Funding Study, which analyzes the funded status of all multiemployer pension plans. As of June 30, 2017, these plans are nearing the healthiest they’ve been since U.S. financial markets collapsed in 2008. In the first six months of 2017, the aggregate funding percentage for all multiemployer pensions climbed from 77% to 81%, reducing the system’s shortfall by $21 billion—an improvement driven largely by favorable investment returns.
In aggregate, asset growth for multiemployer plans far outpaced assumptions for the first half of 2017. But that bears little weight for critical plans, which are hurt by their substantially lower asset bases. Despite the bull market, we’re seeing the funding gap continue to widen between critical and noncritical plans.
While noncritical plans are nearing an aggregate funded percentage of 90%, the funding level for critical plans remains around 60%. Currently about a quarter of the plans tracked by Milliman’s Multiemployer Study fall within critical levels, with some of the most troubled on track to rely on assistance from the Pension Benefit Guaranty Corporation (PBGC)—which itself is facing severe financial challenges. Comparatively, of the approximately 1,250 plans analyzed in the study, around 75% are considered noncritical.
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 noncritical 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 noncritical 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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