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Multiemployer vs. Single DB Plans: Different Staying Power, Same Replacement Concerns

The number of single-employer defined benefit plans has dropped sharply over a nearly 40-year period, while the decline multiemployer DB plans of has been far less dramatic. But in “Beyond the Numbers: An Analysis of Multiemployer Pension Plans,” William Wiatrowski, an economist in the Bureau of Labor Statistics Office of Compensation and Working Conditions, shows that simply noting that DB plans have long been declining in number and participants as DC plans have grown is too simplistic an observation.

So much less dramatic has been the decline of multiemployer DB plans been, in fact, even though their number also declined, they still comprise just over half of all multiemployer retirement plans — 1,442 DB plans versus 1,299 DC plans. And approximately 25% of employees covered by a DB plan participate in a multiemployer plan.

The Department of Labor reports that in 2011 there were 4.2 million current employees participating in multiemployer DB plans and another 6.2 million participants who are receiving distributions from them.

While multiemployer DB plans are showing more staying power than single-employer DB plans, which comprise a scant 6% of single-employer retirement plans, their decline may continue. Wiatrowski notes that the fact that the share of multiemployer DB plan participants who are actively accruing benefits is now 40% of all those participants, and that the drop that has occurred since 1975 may be part of a general trend away from DB plans.

Multiemployer DB plans may be a larger slice of the multiemployer retirement plan pie than is the case for single-employer DB plans and the single-employer plan universe, but Wiatrowski notes that they enjoy parity regarding the percentage of active participants who are contributing to the benefit pot.

And that, Wiatrowski says, means that the number of new entrants into DB plans — including multiemployer DB plans — is not large enough to replace the number of participants who are retiring.