Segal said, for calendar-year plans, it expects modest improvement in the average PPA funded percentage by the time plans submit actuarial certifications. Just under one-quarter of plans in the survey anticipate a funded percentage of 100% or more.
If the actuary’s projections reveal an emerging funding problem, a plan will be classified as either being in “endangered status” (the yellow zone) or “critical status” (the red zone), Segal explained. Those neither “endangered” nor “critical” are said to be in the green zone.
Segal found that the percentage of green zone plans (66%) is higher than the percentage projected last year (58%). Only 9% of plans are anticipated to be in the red zone – seven points less than the percentage predicted last year.
One-quarter of plans are anticipated to be in the yellow zone, according to Segal’s findings.
The Segal report said many trustees continue to make changes that are likely to improve their plans’ zone status, such as reducing future benefit accruals. In addition, according to the report, the market volatility experienced in 2008 will not affect the actual 2008 PPA funded percentage and zone status of calendar-year plans.
Going forward, Segal suggested, the impact of market volatility on all plans can be mitigated by the use of an actuarial asset-valuation methodology that gradually recognizes market value fluctuations over a number of years.
More information is at www.segalco.com .