The subset of “red zone” multiemployer pension plans that are in critical and declining (C&D) status projected to be insolvent within the next 20 years may never recover without Congressional help, Segal Consulting maintains. Participants in these plans are at risk of reduced benefits, including current retirees.
There has been a double-digit decrease in the average market value funded percentage of plans in C&D status since 2010, compared to a double-digit increase for non-C&D plans.
Characteristics of C&D plans include a high retiree and inactive-to-active ratio and a high “burn rate,” i.e. the rate of asset decline, without regard to investment income.
Over the last 10 years, most red zone plans have taken corrective actions. They have increased their average contribution rate by more than 50% and have reduced adjustable benefits for more than 80% of participants. Some red zone plans are now in the yellow or green zone. By comparison, C&D plans are not recovering.
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