According to The Multiemployer Retirement Plan Landscape: A 15-Year Look (2004-2018), the average defined contribution (DC) plan account balance increased from increased from $18,300 at the end of 2004 to $42,300 at the end of 2018, 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 1,048 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 1,121 for the 2004 plan year to 1,048 for the 2018 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.
- Examined DC plans are divided into three broad types. More than one in three (36%) indicated they are money purchase plans, which typically have fixed rather than variable contributions. About three in ten (31%) indicated they are profit-sharing plans, followed by 401(k) plans (27%). 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 DB plan, while 12% are likely standalone in nature.
- The combined market value of assets of the plans in the study is more than $166 billion, while the median asset value of these plans is $46 million.
- The median number of plan participants is 1,320, and the average number of plan participants is 4,091. The median number of participating employers is 50.
Plan Cash Flows
- Form 5500 figures captured contributions made by employers and participants as well as disbursements. Aggregate contributions have varied over the 15-year period, increasing from $4.79 billion in 2004 to $7.32 billion in 2008, decreasing to $6.16 billion in 2010 and then in-creasing again to $11.52 billion in 2018. 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 15-year period, from $23.33 billion in 2004 to $8.95 billion in 2018. 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 $1.46 billion in 2004 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 $2.57 billion in 2018. 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.
- The study also compiled year-by-year returns of the identified calendar year plans. Investment returns were consistently positive over the 15-year period, with the exception of 2008 (-21.0%) and 2015 (0.0%). The median annualized return for this subset of 468 calendar year plans for the 15-year period from 2004 through 2018 is 5.04%.
- The average account balance for a participant in the median multiemployer DC plan was about $42,300 at the end of 2018, down from about $42,300 at the end of 2017.
More About Multiemployer Retirement Plans
For the eight year in a row, Horizon Actuarial Services, LLC and the International Foundation of Employee Benefit Plans have partnered on The Multiemployer Retirement Plan Landscape: A Fifteen-Year Look, an annual benchmarking report on multiemployer pension and retirement plans. Trustees can use the report to benchmark their own plans and understand how the overall multiemployer system is doing. Access the full report to see the complete findings.
Justin Held, CEBS
Senior Research Analyst at the International Foundation
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