For multiemployer pension plans with zone certification filing deadlines in the 12 months between October 1, 2014 and September 30, 2015, Segal Consulting found nearly two-thirds (64%) are in the “green zone.”
Eleven percent of plans are in the yellow zone as established by the Pension Protection Act (PPA), and 26% of plans are in the red zone.
Even though only a quarter of plans are in the red zone, nearly half (49%) of all participants represented are in these plans. In addition, one-half of these red-zone participants are also in plans that are considered to be “critical and declining.”
The analysis found the number of active participants compared to the number of inactive participants in a plan is one indicator of its zone status. In general, red-zone plans have a much higher percentage of inactive participants—92% versus 8% active. However, plans in all zones are “upside-down” regarding contributions coming in versus liabilities.
The Multiemployer Pension Reform Act (MPRA) provides additional corrective options for critical and declining plans, specifically the eligibility to apply for benefit suspensions and possible eligibility for partitions and Pension Benefit Guaranty Corporation (PBGC) financial assistance for mergers.
The average PPA funded percentage is 85% for plans with zone certifications filed in July, August and September of this year; and 87% for plans with zone certification filing deadlines between October 1, 2014 and September 30, 2015.More information from Segal’s analysis is at http://www.segalco.com/media/2310/fall2015zonestatus.pdf.