Tag Archives: Nina Lantz

Multiemployer pension plans experience dramatic funding swings in the first half of 2020 due to COVID-19 and market volatility

Milliman today released the results of its Multiemployer Pension Funding Study (MPFS) as of June 30, 2020, which analyzes the funded status of all multiemployer defined benefit pension plans in the United States.

As of June 30, 2020, the aggregate funded percentage of multiemployer plans dropped to 82%, down from 85% at the end of 2019, resulting in a $26 billion increase in the aggregate funding shortfall. The estimated investment return for the first half of 2020 was about -1.3%, based on a simplified portfolio.

In general, over the past 18 months, increased volatility in the markets has caused dramatic swings in the aggregate funded percentage for most plans. While all plans absorb market gains and losses over time, extreme market movements immediately prior to a plan’s measurement date can have a significant impact on its funding position and annual Pension Protection Act (PPA) zone status.

The past six months have demonstrated why measurement dates matter. As of March 31, the estimated year-to-date return on our simplified portfolio was about -13.4%. So the 70 plans in the MPFS with that year-end date will complete their annual valuations and zone certifications when 2020 asset values are at their lowest for the year so far. This will unfortunately affect their funding position and zone status, despite the current market recovery in Q2 2020.

To view the complete study, click here.

To receive regular updates of Milliman’s pension funding analysis, contact us here.

Reading list: COVID-19 implication for pension plans

The financial effects of the COVID-19 pandemic is a big concern for pension plan sponsors. The following list of articles highlights several topics sponsors must consider to navigate the landscape successfully now and moving forward.

COVID-19 to leave multiemployer pension system more distressed than ever
By Kelly Coffing, Tim Connor, Nina Lantz

Activities in many industries have slowed with concern that the recovery of normal operation could take years, reducing the contributions coming into multiemployer pension plans. This Multiemployer Review explains how COVID-19 could leave the multiemployer pension system even more distressed.

Impact of COVID-19 on your pension plan: CARES Act funding relief for single-employer defined benefit plans
By Delbert Zamora

Single-employer defined benefit plan sponsors need to weigh the impact of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This article focuses on the CARES Act provision allowing deferment to January 1, 2021, of required plan contributions due in the 2020 calendar year.

Impact of COVID-19 on your pension plan: Market volatility and the effect on single-employer plans
By Scott Preppernau

The pandemic has created turmoil for the financial markets, raising profound and potentially long-lasting concerns for pension plan sponsors. This article explores several key financial measurements and plan requirements to help single-employer pensions traverse the current situation.

Pension risk management: COVID-19 FAQs
By William Strange

Market volatility resulting from the coronavirus outbreak has led many organizations to ask a variety of questions related to pension risk management. This FAQ highlights some of those questions with corresponding answers.

Impact of COVID-19 on your pension plan: Considerations for layoffs
By Jeff Baker

Many employers are implementing layoffs to maintain economic viability, which have the potential to create some unintended consequences to pension plans. This article focuses on several plan issues that sponsors should consider following a workforce reduction such as layoffs or furloughs.

Can multiemployer pension plans survive COVID-19?
By Ladd Preppernau and Carrie Vaughn

The effect of the coronavirus on the economy and financial markets has major implications for multiemployer plans. This Multiemployer Alert presents several questions and answers that sponsors must think about concerning their plans.

COVID-19 may exacerbate troubles for multiemployer plans

In March, Milliman published a Multiemployer Alert about the funding impact that market declines related to COVID-19 have had on multiemployer defined benefit pension plans. But COVID-19’s impact goes beyond the market decline.

Many industries are being hit hard by a sudden drop-off in industry activity, with concern that the recovery of normal operation could take several years, reducing the contributions coming into plans. These impacts are a particular concern for mature plans (those with more benefit payments and expenses than contributions), and may have a long-lasting impact on plan funding. Without Congressional action or a speedy market recovery, there may be another wave of plan failures. Lawmakers need to think carefully before providing solutions that further strain an already stressed system.

In this Multiemployer Review, Milliman’s Kelly Coffing, Tim Connor, and Nina Lantz explain in more detail how COVID-19 could leave the multiemployer pension system even more distressed.

Multiemployer pension plans’ aggregate funding percentage reaches 85% in 2019, matching pre-financial crisis levels

Milliman today released the results of its latest Multiemployer Pension Funding Study (MPFS), which analyzes the funded status of all multiemployer defined benefit pension plans in the United States.

As of December 31, 2019, the aggregate funded percentage of multiemployer plans rose to 85%, up from 74% a year prior, due primarily to double-digit asset returns that exceeded expectations for the year. Overall, multiemployer plan funding levels are now back to where they were in 2007, before the financial crisis, with a greater percentage of plans over 100% funded compared with 12 years ago. However, the picture is much less rosy for troubled multiemployer pensions, with 104 plans now funded below 50%, compared with just 28 in 2007.

While about 130 plans continue on a path toward insolvency, the majority of non-critical plans have improved since 2007 and are at higher funding levels today. In addition to investment performance, many plans are seeing funding levels increase due to benefit and/or contribution adjustments made during the past decade.

Milliman’s most recent MPFS also explores the latest trends in the average discount rate assumption for all plans as well as what may lie ahead for multiemployer plans given potential legislation and unknown investment returns.

To view the complete study, click here.

To receive regular updates of Milliman’s pension funding analysis, contact us here.

Funded percentage of multiemployer pension plans rebounds to 82% in first half of 2019

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.

To view the complete study, click here.

To receive regular updates of Milliman’s pension funding analysis, contact us here.

Despite double-digit investment losses in 2018, nearly one-third of multiemployer plans over 90% funded, but least-funded plans show little hope of recovery without help

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.

To view the complete study, click here.

Also, to receive regular updates of Milliman’s pension funding analysis, contact us here.