Multiemployer pension plans see funding drop in 2015 second half

Hit by lower interest rates that boosted the value of plan liabilities and subpar investment results, the funded status of multiemployer pension plans fell during the last six months of 2015, according to a Milliman Inc. study released Tuesday.

At year-end 2015, the plans were, on average, 75% funded, down from 79% funded as of June 30, 2015.

During that six-month period, the value of plan liabilities rose $8 billion to $612 billion, while the value of plan assets fell $18 billion to $461 billion, resulting in an aggregate funding shortfall of $151 billion as of Dec. 31, 2015, up from $125 billion compared to the end of June.

“Multiemployer plans continued to be stuck in a rut in 2015,” Kevin Campe, a Milliman principal and consulting actuary in Chicago, said in a statement. “Currently, at least 76 plans with $28 billion of shortfall are projected to be insolvent at some point. These plans may be beyond help at this point, and several more may be headed in this direction,” he added.

The analysis found the number of plans that were at least 100% funded fell sharply during the six-month comparison period, while the number of plans that were significantly underfunded jumped.

For example, as of Dec. 31, 2015, 192 plans were at least 100% funded, down from 279 six months earlier, while 264 plans, as of Dec. 31, were less than 65% funded, up from 214 as of June 30.

Under a 2014 law, plans that are projected to become insolvent are allowed, after receiving approval from the U.S. Treasury Department, to cut benefits.

Currently four multiemployer plans, including the giant Central States, Southeast and Southwest Areas Pension Fund, which at year-end 2014 had a benefit funding shortfall of just over $17 billion, have filed benefit cut applications with federal regulators, who have not yet made a decision on any of them.

The Milliman analysis is based on public reporting forms filed by nearly 1,300 multiemployer pension plans.