Multiemployer Plans’ Funded Status Improved in ’16

Multiemployer pension plans’ funding levels improved in the second half of 2016, a recent study says. The results mark a general improvement, interrupted by a few short periods of backtracking, since the Great Recession.

In the Spring 2017 Milliman Multiemployer Pension Funding Study, Milliman estimates that the aggregate funded percentage increased from 76% by June 30, 2016 to 77% by New Year’s Eve. In addition, the overall funding shortfall fell by $4 billion, the report says.

Milliman attributes the results to favorable investment returns, contribution increases, and benefit cuts that plans pursued in the wake of the recession.

The slight improvement in funding is not the only good news Milliman had for multiemployer pension plans. Milliman also estimates that the 2016 calendar year investment return was approximately 7.7%, which it says would spell greater gains than the investment return assumptions the plans made.

The study also says that plans that face more acute funding challenges spend more on paying down funding shortfalls than they do on new benefit accruals, and that they are struggling to do so.