So You Want to Be a Star (Multiemployer Plan)

The SOA has recently given accolades to the Screen Actors Guild Producers Pension Plan; what can other multiemployer plan sponsors do to be like them?

The Screen Actors Guild (SAG) Producers Pension Plan is considered to be in good financial health and can be an example for other multiemployer pension plans.

As of January 2014 (the latest available data), the plan was 84% funded, with $3.5 billion in assets against benefit liabilities of $4.2 billion, according to the Society of Actuaries (SOA). In the context of the red-yellow-green zone system established by the Pension Protection Act (PPA), the SAG plan is considered to be in the “green zone”—the best financial health zone under this system. 

Dale Hall, managing director of research with the Society of Actuaries in Shaumburg, Illiniois, tells PLANSPONSOR that a couple of years ago, the SOA held a blue-ribbon panel on public pension plan funding and some of those best practices spill over to other pension plan markets.

Making contributions at least in excess of the normal cost of the plan—how much benefits are accruing in the current year—will help plan get into a better financial position. During 2014, the SAG plan received $203 million in contributions, of which $80 million covered the cost of benefits that active participants earned during 2014, leaving $123 million to be applied toward the funding shortfall.

Hall also suggests that unfunded liabilities should be amortized over a time that’s no longer than 15 years.

NEXT: Managing shifting demographics

To get contributions from all participating employers, an agreement should be established. For example, Hall says the union of SAG employees will get together with participating employers and talk about how funding will work from all employers. They have an agreement in place.

Of course, it also helps the SAG plan that the number of active members in the plan is about double the number of retired members receiving benefits. SAG tends to thrive have lots of new participants joining the plan, Hall notes.

However, for many multiemployer plans, especially those that originated decades ago as unionized labor increased, the ratio of active participants to retirees is changing. For example, Hall says, in manufacturing and transportation, there are less employees today than 30 or 40 years ago, and in some industries, new employees may be going into defined contribution (DC) plans. SAG sees some plans that no longer have any active participants; these plans are just working to fund benefits going out.

Hall suggests all multiemployer plans work with plan actuaries to look at their liabilities, make good contributions, and use good investment strategies to make sure they can fulfill promised benefits.

“The great thing about our profession is we are well-positioned to help these plans think about long-term benefits,” Hall says. “And, we think it is great that these organizations still offer defined benefit (DB) plans to employees—a good benefit.”