Consulting firm The Segal Company found the average funded ratio came in at 87% in 2003’s version of the Survey of the Funded Position of Multiemployer Plans, down 8% from the 95% recorded in the previous year (See Multiemployer Pensions See Further Funding Erosion ). The data, though, is influenced by three years of equity losses and mounting liabilities, Segal said since 24 of the 447 plans canvassed for the report returned data for plan years that ended in early 2003, at the trough of the three-year bear market. These plans had a significantly lower funded ratio (75%), pulling the entire average lower.
Because of this, Segal found reason to be optimistic about the number, pointing to signs that multiemployer plans weather “The Perfect Storm” of the last three years rather well. Overall, Segal said the average funded ratio for multiemployer plans continues to be strong.
The funding ratio decline showed no discrimination across a variety of industries or plan sizes. Among industry classifications, ratios ranged from the higher funded ratios in the retail trade and food and entertainment industries – 91% and 90%, respectively – to services, construction and transportation industries with the lowest ratios – 86%, 86% and 85%, respectively. Hardest hit in the latest report were plans in the transportation industry that saw a 12% drop in funding ratios.
Across plan sizes, Segal found the average funded ratios were highest for plans with the smallest and largest number of participants. Plans with less than 500 participants and those with more than 100,000 showed funding ratios of 90%, compared with an 85% ratio in plans with participant counts between 10,000 and 49,999 and an 82% ratio in the plans with 50,000 to 99,999 participants. The latter group also experienced the greatest decrease in the average funded ratio between the 2002 and 2003 surveys at 15%.
Also on the wane in the 2003 report was the number of plans that were 100% funded for their vested benefits. Only 31% of the plans in the latest reading were fully funded, down a whopping 36% from the 67% that reported being filled to the brim in the prior year’s survey. Further, there were more than twice as many plans in the 2003 survey (308) than in the 2002 survey (152) where assets did not fully cover the liability for vested benefits.
Segal studied 447 plans with combined assets over $132 billion covering more than 4.4 million participants. The survey, which is primarily based on data for the 2001 and 2002 plan years, determined the funded portion of the plans using adjusted interest rates based on rates prescribed by the Pension Benefit Guaranty Corporation (PBGC). A two-page report of survey results is available on the Segal Web site: http://www.segalco.com/publications/surveysandstudies/spring04fundingsurvey.pdf .