New Research: Despite Increased Employer Contributions, Multiemployer Pension Plans' Unfunded Liabilities Continue to Grow

The Society of Actuaries Releases Analysis of Multiemployer Pension Plans Funding Status

Mar 10, 2016, 09:00 ET from Society of Actuaries

SCHAUMBURG, Ill., March 10, 2016 /PRNewswire/ -- New research released today by the Society of Actuaries (SOA) found that despite an aggregate increase in employer contributions across the multiemployer pension plan (MEPP) system of 31 percent from 2009-2013, the unfunded liabilities of MEPPs continued to increase. By 2013, total unfunded liabilities reached a total of $115 billion to $500 billion, depending on which funding calculation method is used.

As part of the SOA's ongoing commitment to analyzing the financial health of retirement plans, the SOA study provides an analysis into the funding progress of MEPP contributions for plan years 2009-2013 and partial year data from 2014, based on Department of Labor filings as of January 5, 2016. The SOA's analysis explores the levels of contributions to the MEPP system and measures their progress against funding benchmarks.

"There are roughly 10 million people covered by the multiemployer pension system who are counting on these pension systems as part of their retirement," said Lisa Schilling, FSA, EA, FCA, MAAA, a retirement research actuary at the SOA. "The SOA conducted this research to arm retirement actuaries with another way to measure a plan's funding progress, and to equip all parties with accurate information to make smart decisions and progress towards funding goals."  

Contributions to the system for the years analyzed significantly exceeded legally defined Minimum Required Contribution (MRC) calculations1. For example, for 2009, aggregate contributions were 8.75 times the aggregate MRC, and contributions for 94 percent of plans exceeded their MRCs. And, by 2013, aggregate contributions were twice the aggregate MRC. However, according to the SOA, while contributions significantly exceeded MRCs, in many cases, plans with significant unfunded liabilities had low or no minimum required contributions due to large credit balances from previous years.

There are several other factors that contributed to the MEPP system's unfunded liabilities:

  • The system's aggregate contributions increased on average 6.9 percent per year, significantly outpacing the average inflation rate of 2.1 percent per year. However, contributions for a large percentage of plans were insufficient to prevent their unfunded liabilities from growing, let alone to close their funding gaps.
  • Contributions were insufficient to keep unfunded liabilities from growing for most plans – 75 percent of plans saw unfunded liabilities grow when liabilities are measured using Treasury Department rates.
  • Decreasing numbers of active participants compounds the funding pressures as the number of active participants fell roughly 2 percent per year. Because MEPP contribution rates are typically negotiated for several years in advance as a function of active participants, decreasing numbers of active participants may mean that contributions actually received toward the end of the negotiated period may be significantly less than anticipated during negotiations.

"The good news is MEPP funding levels appear more positive for 2014, plus many plans expect increased contributions in future years," said Schilling. "Early indications for 2014, based on roughly 60 percent of plans reporting by January 2016 are show improving trends."

The SOA will be releasing a portion of this analysis – the MEPP Contribution Index – later this month, and will update the Index annually for release every January.

About Multiemployer Pension Plans
The MEPP system in the United States includes approximately 1,300 plans that cover roughly 10 million participants—about 3.5 million of whom are retired— from about 200,000 employers in the private sector.

About the Report
The SOA analyzed Department of Labor Forms 5500 for plan years 2009-2013, and 2014 based on available data as of Jan. 5, 2016.

For more information, view a full version of the Multiemployer Pension Plan Contribution Analysis report.

About the Society of Actuaries
With roots dating back to 1889, the Society of Actuaries (SOA) is the world's largest actuarial professional organization with more than 26,000 members. Through research and education, the SOA's mission is to advance actuarial knowledge and to enhance the ability of actuaries to provide expert advice and relevant solutions for financial, business and societal challenges. The SOA's vision is for actuaries to be the leading professionals in the measurement and management of risk.

1 Internal Revenue Code Sections 431 and 432 with associated regulations define minimum funding requirements for multiemployer pension plans. 


Pat Gould

Society of Actuaries

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Sarah Kossek


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SOURCE Society of Actuaries