Multiemployer Pensions See Further Funding Erosion

April 15, 2003 ( - The percentage of multiemployer defined benefit pension plans that are fully funded for their vested benefits has declined to 67% in 2002 from 83% just one year prior.

This rate represents the lowest percentage in seven years and is only slightly higher than the 65% of plans that were fully funded in 1983, the first year of the Segal Company’s Survey of the Funded Position ofMultiemployer Plans.   The latest release is based on data from 455 plans with combined assets of almost$140 billion covering more than 3.9 million participants.

However, the average ratio of assets continues to be high at 95% after only declining three percentage points from the previous year.   When the plans with assets in excess of 100% of vested benefits are removed, the ratio for the remaining plans plummets to 86%, maintaining the same level as 2001.   This is despite the fact that 2002’s results include nearly twice as many underfunded plans (152) than the previous data (78).

The highest of these funded ratios was concentrated in the retail trade, food, and entertainment industries that recorded 98% average funded ratios.   On the other end of the scale were plans that fell into the “all others” group, recording an average funded ratio of 91%.   Experiencing the greatest decline in 2002 was the construction industry plowing down three points, to end at 95%.  

Forward Thinking

“While multiemployer plans continue to fare better than singleemployer plans both with respect to their funded position and the PensionBenefit Guaranty Corporation (PBGC), our outlook for the future remainscautious.  One of the strengths of defined benefit retirement programs isthat they are designed for the long-term and can withstand some degree offluctuation, but continued difficult market conditions will place pressureon multiemployer and single employer pension plans alike,” according to David Blumenstein, National Director of Segal’s MultiemployerPractice.

Going forward, Segal points out that this year’s results do not include the continued interest rate decline of 2002 or 2002’s year long market slump in the data.   Both of these factors continued to chip away at pension funding levels and will be reflected in next year’s release of data.

More information on the results of the 2002 data can be found at .