According to a press release, in 2008, 75% of survey respondents reported they held a safe status as defined by the Pension Protection Act (PPA), 14% were endangered or seriously endangered, and only one in ten (11%) reported being in a critical status. A year later, only 27% of the survey respondents reported holding a safe status. Slightly more than one-third (36%) are in an endangered status, and a similar proportion (37%) report a critical status.
Among plan sponsors with underfunded DB plans, slightly more than half (51%) have developed a funding improvement or rehabilitation plan which has been implemented or is on its way to being implemented, the press release said. The remaining sponsors with underfunded plans (49%) are waiting for guidance or are just starting to develop a plan.
Of those plan sponsors who have developed a plan to address their endangered or seriously endangered status, most (86%) are increasing employer contribution levels. Among plan sponsors who have developed a plan to address a critical status, a similar proportion (87%) report they are increasing employer contribution levels, 68% report reducing or eliminating early retirement subsidies, and 55% say they are reducing future benefit accruals.
Under PPA, plans certified as endangered must create a funding improvement plan. Those certified as critical must create a rehabilitation plan.
To provide defined benefit plans temporary funding relief, the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) allows sponsors to choose a one-year funding status freeze.
Slightly more than half of plans responding to the IFEBP survey (54%) are taking advantage of the freeze option, according to the press release. One in four (25%) have decided not to take the freeze option. For the remaining 21%, the option is not applicable because their 2009 status remained the same as their 2008 status.
Plan sponsors that took the freeze option cited waiting to see if the markets will rebound as the number one reason (75%), followed by waiting to see if the federal government will provide additional funding relief (50%), and allowing more time to fix funding on their own terms versus as directed by PPA (46%).
Of the plan sponsors not taking the freeze option, the majority stated they did not want to delay implementing changes to improve their funding status (78%). Other reasons cited include wanting to take advantage of the three-year extension for their funding improvement/rehabilitation plan (37%) and the thought that waiting will only worsen their finances and make finding solutions more difficult (33%).
The survey, Multiemployer Pension Funding Status and the Freeze Decision, was conducted in August 2009. Responses were received from 213 International Foundation of Employee Benefit Plans and International Society of Certified Employee Benefit Specialists members in the United States, each representing a separate plan.
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