A new report, The Multiemployer Retirement Plan Landscape: A Ten-Year Look (2005-2014), from Horizon Actuarial Services, LLC, and the International Foundation of Employee Benefit Plans (IFEBP), shows average account balances in defined contribution (DC) multiemployer retirement plans have grown over the past decade, along with contributions and investment returns.
The average account balance for a participant in the median multiemployer defined contribution (DC) plan was about $38,200 at the end of 2014, up from about $36,100 at the end of 2013. In 2014, these DC plans saw a median investment return of 5.6%. Rates of return were volatile over the last decade. The median annualized return from 2005 to 2014 was 5.3%.
For multiemployer defined benefit (DB) plans, investment returns over the past decade were also volatile—marked by the financial collapse in 2008, when the median investment return for multiemployer DB plans was -23.5%. However, the median annualized return was about 5.6% over the 10-year period from 2005 through 2014. The 2014 median investment return was 6.3%, slightly below the 7.5% median return assumption.
As of December 31, 2014, the median funded percentage for multiemployer DB plans was 85.9% (based on the market value of assets). This was a significant improvement over the median funded percentage at the end of 2008, which was 67.6%, and approached the median funded percentage of 88.7% from the beginning of 2008. The increased funding allowed more plans to enter the “green zone” under the Pension Protection Act (PPA). Sixty-one percent of funds were in the green zone at the end of 2014.NEXT: Still challenges
Over the past decade (2005 through 2014), few plans saw increases in the number of active participants, while the number of inactive participants continued to grow. Looking over the last 10 years, in 2005 the ratio of active participants to inactive participants was 9:10—at the end of 2014 the ratio had declined to 6:10.
“Although the active-to-inactive participants ratio has remained fairly steady over the past few years, it is still considerably less favorable then it was prior to the 2008 recession,” explains Jason Russell, consulting actuary, Horizon Actuarial Services, LLC. “As plans continue to mature and their cash flows become more negative, they are relying on their investment returns to sustain them into the future.”
At the end of 2014, there were 1,380 multiemployer DB plans—1,334 plans were financially solvent, and 46 were insolvent and receiving assistance from the Pension Benefit Guaranty Corporation (PBGC). The plans had assets of more than $480 billion, and they covered 10.5 million participants and their beneficiaries.
At the end of 2014, there were 1,102 multiemployer DC retirement plans, with total assets of more than $130 billion. These plans covered 3.8 million participants and beneficiaries. The majority of plans—80%—were offered in tandem with a DB plan.
For more information on The Multiemployer Retirement Plan Landscape: A Ten-Year Look (2005-2014), visit www.ifebp.org/MultiemployerRetirement.