May 21, 2012 (PLANSPONSOR.com) - Results of Segal’s latest zone-status survey of multiemployer pension plans show that they are still facing formidable funding challenges.
Although multiemployer plans experienced generally strong market performance in late 2009 and 2010, overall investment performance was relatively poor in 2011 because of continued market volatility. Consequently, the investment losses of 2008 and early 2009, in conjunction with the lackluster 2011 investment results, had an impact on most plans.
The proportion of calendar-year multiemployer pension plans in the green zone declined by four percentage points between January 1, 2011, and January 1, 2012: from 66% to 62%. The survey shows that the average Pension Protection Act of 2006 (PPA'06) funded percentage for those plans decreased by three percentage points over that period: from 89% to 86%. Prior to the market downturn that began in late 2008, more than three-quarters of calendar-year plans (83%) were in the green zone and the average funded percentage was 97%. In the prior year’s survey, only 3% of the plans that were certified as green were projected to migrate into the yellow or red zone. Unfortunately, the plans’ projected zone status has deteriorated somewhat since then. Data from this year’s survey indicates that, over the next few years, 13% of the plans that were certified as green are projected to migrate into the yellow or red zone.