The majority of multiemployer defined benefit (DB) retirement plans improved their funded status in 2023 compared with previous years. Although the median investment return was lower in 2023 (12%) than in 2021 (14%), the share of DB plans in green status rose from 72% in 2021 to 74% in 2023, according to The Multiemployer Retirement Plan Landscape: A 15-Year Look (2009-2023), recently released by the International Foundation of Employee Benefit Plans.
Plans in the Study
The report examined Form 5500 data submitted by 1,321 multiemployer DB retirement plans. Of these, 1,153 were ongoing solvent, holding approximately $706 billion in assets and covering about 11 million participants and their beneficiaries. Changes in the total plan count in 2023 were driven by several factors, including the formation of 21 new plans (usually formed from mergers), the termination of 76 plans and 71 plans receiving Pension Benefit Guaranty Corporation (PBGC) assistance. In addition, 17 plans had their final filing due to merger activity, the largest number in the 15-year period, as plans appeared to be seeking economies of scale by merging to reduce operating expenses and investment fees.
Plan Participants and Cash Flow
Overall, the number of participants declined in 2023. Active participants (those working) fell from 4.1 million in 2021 to 3.9 million. The number of inactive participants (those not working, including deferred vested employees, retirees and beneficiaries) also fell from 7.0 million in 2021 to 6.8 million. The decreases are largely attributed to the final filings of two large plans.
As retired participants taking distributions outnumber active participants, benefit payments to retirees can exceed contributions from employers and cause a negative cash flow. From 2021 to 2022, most industries experienced an improved net cash flow as a percentage of assets, driven by strong asset returns. From 2022 to 2023, the opposite was true due to poor returns in 2022. In 2023, the median net cash flow was -2.7%.
Plan Funding Status
In 2023, 74% of DB plans in the study were in the green zone, leaving 26% in endangered, critical and declining, or critical status. In 2022, severely underfunded plans became eligible for special financial assistance (SFA) from the American Rescue Plan Act of 2021 (ARPA). This assistance provided funding for select troubled multiemployer plans, allowing them to pay benefits until the year 2051. According to the PBGC, 69 plans had received or been approved to receive SFA by the end of 2023, totaling $53.6 billion. Of those plans, 37 were identified as having moved from critical and declining status into critical status in 2023.
Plan Costs
As plan trustees developed action strategies to improve their plans’ funded status, they considered normal annual plan costs (benefit payments and operating expenses), expected future contributions and anticipated future investment returns. The normal costs rose over the past 15 years: The median normal cost was $2,800 per active participant in 2009 and increased to $4,700 by 2023, an average increase of 3.8% each year. The median employer contribution per participant increased from $5,200 to $10,800 over the same period, an average increase of 5.4% each year. The median plan investment return assumption has remained at 7% since 2020.
More About Multiemployer Retirement Plans
The Multiemployer Retirement Plan Landscape: A 15-Year Look (2009-2023) is the eleventh multiemployer retirement plan benchmarking report produced in partnership with Horizon Actuarial Services, LLC, and the International Foundation of Employee Benefit Plans. This comprehensive report examines data from Form 5500 annual reports filed by multiemployer pension and retirement plans with the U.S. Department of Labor. Form 5500, as required by the Employee Retirement Income Security Act (ERISA), collects data filed by private-sector retirement plans on plan benefits, funding, investments and operations.
