According to The Multiemployer Retirement Plan Landscape: A 15-Year Look (2003-2017), the average defined contribution (DC) plan account balance increased significantly from 2003 to 2017, growing to $43,500 while aggregate disbursements also grew. The increase in disbursements—coupled with a lack of growth in the number of active participants having contributions made on their behalf—was likely driven by maturing plan populations as an increasing number of participants cashed in their accounts upon retirement or termination. In addition, investment returns over this period were volatile and included the biggest collapse in the financial markets since the Great Depression.
This report is based on the Form 5500 annual reports filed by 1,052 DC multiemployer plans with the U.S. Department of Labor. The report tracks DC plan trends over a 15-year time horizon.
Here are 10 key takeaways from the extensive report on multiemployer defined contribution plans.
Plans in the Study
- The total number of multiemployer DC plans decreased from 1,100 for the 2003 plan year to 1,052 for the 2017 plan year, with some fluctuations year by year. Factors such as the establishment of new plans, mergers and plan terminations contributed to changes in the overall counts over the 15-year period.
- The examined DC plans are divided into three broad types. More than one in three (37%) indicated they are money purchase plans, which typically have fixed rather than variable contributions. About three in ten (30%) indicated they are profit-sharing plans, followed by 401(k) plans (26%). The remaining 7% included plans that did not specify a plan type or indicated they are target benefit plans, offset plans or 403(b) plans. An analysis determined that 81% of these plans are associated with a defined benefit (DB) plan, while 11% are likely standalone in nature.
- The combined market value of assets of the plans in the study is more than $164 billion, while the median asset value of these plans is $45 million.
- The median number of plan participants is 1,264, and the average number of plan participants is 3,852. The median number of participating employers is 50.
Plan Cash Flows
- Form 5500 figures captured both contributions made by employers and participants and disbursements. Aggregate contributions have varied over the past 15 years, increasing from $4.70 billion in 2003 to $7.32 billion in 2008, decreasing to $6.16 billion in 2010 and then increasing again to $10.53 billion in 2017. A number of factors may have driven the fluctuations, including changes to wage packages stemming from the economic turmoil at the time.
- Aggregate disbursements, on the other hand, have increased over the past 15 years, from $2.85 billion in 2003 to $8.20 billion in 2017. This trend is likely driven by maturing plan populations, with increasing numbers of participants taking their account balances upon retirement or termination of covered employment.
- In general, net cash flows have shown modest improvement in more recent years. Total net cash flow changed from a positive net cash flow of $1.84 billion in 2003 to a slightly negative net cash flow in 2010. Since then, net cash flows have become more positive, reaching a positive net cash flow of $2.33 billion in 2017. The trends in cash flows resemble the trends in participant counts. For example, as the total number of active participants has grown in recent years, contributions have also increased.
Plan Investments
- The study also compiled year-by-year returns of the identified calendar year plans. Investment returns were consistently positive over the past 15 years, with the exception of 2008 (-21.0%), and 2015 (0.0%).
- The median annualized return for this subset of 443 plans for the 15-year period from 2003 through 2017 is 6.24%. For comparison, the median annualized return for the prior 15-year period from 2002 through 2016 was 4.83%. The increase in the annualized return was due to the fact that the median return for 2017 (13.4%) was higher than the median return for 2002 (-6.7%)
- The average account balance for a participant in the median multiemployer DC plan is about $43,500 at the end of 2017, up from about $39,100 at the end of 2016.
More About Multiemployer Retirement Plans
For the seventh year in a row, Horizon Actuarial Services, LLC, and the International Foundation of Employee Benefit Plans partnered on The Multiemployer Retirement Plan Landscape an annual benchmarking report on multiemployer pension and retirement plans. For the first time, the report tracks trends over a 15-year time horizon. Trustees can use the report to benchmark their plans and understand how the overall multiemployer system is doing.
Learn more about the findings for DB plans in the recent blog post: The Multiemployer Retirement Plan Landscape: 10 DB Plan Takeaways. Access the full report to see the complete findings.
Justin Held, CEBS
Senior Research Analyst at the International Foundation
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