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Multiemployer pension funding rises and falls with the economy

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The funded levels of the nation's nearly 1,400 multiemployer pension plans have fluctuated widely due to ups and downs in the equities market, according to a new analysis released Tuesday.

In 2007, the plans had a median funded level of 89%. In 2008, when the equities market plunged as the Great Recession began, the median funded level sank to 68%, according to the International Foundation of Employee Benefit Plans and Horizon Actuarial Services Inc. survey.

Funded levels have generally moved up since then, largely due to investment gains as the equities market rebounded. In 2012, the plans' median funded level hit 78% and rose to 86% in 2013, the last year analyzed in the 10-year survey.

“Strong investment returns, combined with trustee actions, have allowed most multiemployer pension plans to improve their funding levels in recent years,” Jason Russell, a consulting actuary in Horizon Actuarial Services' Silver Spring, Maryland, office said in a statement.

While funded levels have improved in recent years, there are worrisome demographic trends, chiefly an aging participant base as plans have found it difficult — due to such factors as a provision in a 1980 federal law that requires employers leaving underfunded plans to pay a share of those plans' promised but unfunded benefits — to attract new employers.

For example, at the end of 2004, the median ratio of active participants to inactive participants — such as retirees — was nearly 1-to-1. At the end of 2013, the median ratio of active participants to inactive participants sank to 6-to-10.

“To gain financial stability going forward, trustees will need to have a greater focus on the aging demographics of their plans,” Mr. Russell said.

A little more than half — 57% — of the nation's 1,387 multiemployer plans are offered to employees whose employers are in the construction industry, with 11% in the manufacturing industry and 10% in the transportation industry, such as trucking.

Just over 60% of the plans hold assets between $25 million and $499 million. Just under 1% of plans have at least $5 billion in assets, while 2.3% have assets between $2 billion and $4.99 billion, and 3.7% have between $1 billion and $1.99 billion in assets.

In addition, just over 30% of plans have between 1,000 and 2,999 participants, while 2.5% of plans have at least 50,000 participants, 2.7% have between 25,000 and 49,999 participants and 7.4% have between 10,000 and 24,999 participants.