Multiemployer Plans’ Zone Status Remains Stable

The latest Survey of Plans’ Zone Status from Segal Consulting shows that a majority of multiemployer plans are still in the green zone.

The survey found 64% of plans are in the green zone, while the percentage of plans in the yellow zone and red zone remained stable at 11% and 25%, respectively. These numbers are virtually unchanged compared to data for the previous 12-month period.

Among plans in the red zone, the percentage in critical status is 15%, while the percentage in critical and declining status is 10%.

“The median investment return for clients who filed certifications in the 12 months ending on September 30 was just 0.01%, but despite the low returns the number of plans in the green zone remained stable,” says Diane Gleave, senior vice president with Segal.

The survey also looked at how much multiemployer plans have improved since the time of the global financial crisis in 2009, when only 38% of plans certified to be in the green zone. “The gradual increase in the percentage over recent years is in part a result of the actions taken by trustees in their Rehabilitation and Funding Improvement Plans,” says Gleave.

Another key historical finding was that just less than half of the plans currently in critical and declining status were in the red zone before the global financial crisis, and may not survive without application of and approval for benefit suspensions or partitions under the Multiemployer Pension Reform Act.

“Going forward,” Gleave adds, “trustees should monitor other measures beyond zone status. This includes cash flow, contribution margins or deficits, and the impact of potential employer withdrawals, so that they can take appropriate measures to manage risks.”

The survey presents the most recent data available for all Segal multiemployer client plans based on zone certifications filed in the 12 months ending in September 2016. The plan data includes 376 plans covering 3.8 million participants with combined assets of nearly $184 billion. A review of data from Form 5500 reports for all multiemployer plans indicates that Segal clients’ zone status by number of plans are representative of that universe as a whole.