Milliman: Multiemployer pension funding ratios drop slightly in 2014

By: Meaghan Kilroy
Published: March 18, 2015 - Pensions & Investments

The aggregate funded status of U.S. multiemployer pension plans fell slightly to 80% in 2014, down one percentage point from the end of 2013, as liabilities rose faster than assets, said a report from Milliman.

Assets rose to $480 billion as of Dec. 31, up 1.5% from the prior year, while liabilities rose 2.1% to $597 billion, Milliman estimated.

gPeople assume that the stock market recovery would be enough to push these multiemployer plans back to where they were in 2007, but itfs not that simple,h said Kevin Campe, principal and consulting actuary at Milliman and co-author of the report, in a news release. gLiabilities have been growing at 7.5% per year on average, which complicates a full recovery.h

The recovery has been harder for more mature plans whose benefit payments and plan expenses often outweigh contributions, the report said. Prior to the 2008 financial crisis, multiemployer pension plans were more than 85% funded.

To reach full funded status in the future, more than half of the pension funds analyzed will have to achieve returns of 8% or more per year over the next 10 years, Milliman estimated

It remains to be seen how funding levels for severely underfunded plans will be affected by the 2014 Multiemployer Pension Reform Act enacted in December, the report added.

The new law allows some troubled multiemployer plans to adjust benefits to keep the plan solvent. It also raised the annual Pension Benefit Guaranty Corp. premiums that multiemployer plans must pay to $26 per participant from $13 and made permanent the provisions of the Pension Protection Act of 2006 that were scheduled to expire Dec. 31.

Mr. Campe could not immediately be reached for additional information.

Results in Millimanfs report were derived from pension fundsf Form 5500 filings; between 1,200 and 1,300 multiemployer pension funds were assessed.