Multiemployer Plan Funding Continues to Firm Up

Segal’s 2006 Survey of the Funded Position of Multiemployer Plans found that the projected average withdrawal liability funded ratio will have increased from 81% as of the 2006 survey to about 88% by the end of year. Withdrawal liability is considered a financial stability indicator for a multiemployer plan.

According to the study report, the percentage of surveyed plans that were fully funded for their vested benefits increased from 11% in the previous survey to 14%.

Segal said the plan financial measure comes from the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), which provides that employers pulling out of plans with assets below the actuarial present value of vested benefits may incur withdrawal liability.
 
Among the study findings:

• the average withdrawal liability funded ratios remained about the same in all industries. The entertainment, manufacturing, and retail trade and food industries all had funded ratios (89%, 87%, 86% respectively) – better than average.
• the average withdrawal liability funded ratios were similar for plans of all sizes as measured by the number of participants. Only four percentage points separated the size groups with the highest and lowest ratio figure.

Segal said the withdrawal liability funded ratios differ from the funding formulas called for under the Pension Protection Act (PPA). Segal estimated that the average PPA funding percentage projected to the end of 2006 is 94%.
 
To prepare the report, Segal researchers studied 410 plans with a combined $138 billion in assets, according to the company. The surveyed plans covered 3.5 million participants – about 35% of the total number of workers participating in multiemployer plans.

More information is  here .