As we all know, the Great Recession walloped pension and retirement plans, and few were immune. Multiemployer plans in the U.S. were no exception. Five to six years later, we’re seeing rebounding, thanks to an improved market and the difficult decisions made by trustees to improve plan funding.
For the second year, the International Foundation and Horizon Actuarial Services, LLC have partnered on an annual benchmarking report, this time looking at financial and demographic trends impacting both multiemployer defined benefit (DB) pension and defined contribution (DC) retirement plans over the decade 2003 to 2012.
Plans have been affected not just by the turbulent economy but also by changing demographics. An aging population means the number of active participants in plans for whom employer contributions are made is falling, while the number of inactive participants (chiefly retirees) is growing. This has a great impact on DB plans, as cash outflow is outpacing cash inflow.
Specific findings include:
- The median investment return for multiemployer DB plans for calendar year 2008 was -23.5%, due to the market collapse. The median annualized return over the ten-year period from January 1, 2003 through December 31, 2012 was 5.9%.
- At the end of 2012, the median DB funded percentage was 77.8% on a market value of assets basis. This is a significant improvement over the median funded percentage at the end of 2008, which was 67.4%, but still short of the 88.6% median funded percentage at the beginning of 2008.
- Among multiemployer DC plans, the median investment return for calendar year 2008 was -20.8%. The median annualized return over the ten-year period from January 1, 2003 through December 31, 2012 was 5.4%.
- The average account balance for a participant in a multiemployer DC plan is about $30,000. Average balances have grown over the past decade with contributions and investment returns.
The Multiemployer Retirement Plan Landscape: A Ten-Year Look (2003-2012) report provides historical trends within all U.S. multiemployer DB and DC plans that will help trustees, consultants and policy makers gain a better understanding of these plans and their environment. This report is free to International Foundation members. (Nonmembers can download the report for $195.)