Data and Research October 11, 2018

‘Red Zone’ Multiemployer Pension Plans May Never Recover

But with Congressional assistance, there is hope for these plans, Segal Consulting says.

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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.

Segal Consulting notes that the Congressional Joint Select Committee for the Solvency of Multiemployer Pension Plans is currently weighing options for strengthening these plans.
Data and Research October 10, 2018

Americans, Even Those Already Retired, Could Do More to Secure Their Financial Future

Debt affects many retired Americans and fear of the stock market is affecting those not yet retired, a survey finds.

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A survey of 1,000 Americans ages 18 and older would indicate that many are not doing enough to secure their financial future.

The 2018 Retirement in America Survey from First National Bank of Omaha found 38% of people who have yet to retire have not started saving for retirement. In addition, 69% have not calculated how much money they will need for retirement, while 65% prioritize getting out of debt over investing for retirement.

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Specifically, 38% of people who have yet to retire said they do not regularly contribute to a 401(k) or IRA, while 37% contribute to a 401(k) only, 8% to an IRA only and 17% to both. In addition, 18% of retirees said they do not have an investment portfolio. Of those that do, 22% check their investment portfolio monthly, 19% quarterly, 14% weekly, 13% daily, 7% yearly, 2% every few years and 4% never.

Debt affects many retired Americans. The survey found 37% of retirees are still paying off a mortgage, 29% are paying off auto loans, 15% are paying off medical debt and 8% are paying student debt.

And, fear of the stock market is affecting many of those not yet retired. Nearly half (48%) of survey respondents who have yet to retire indicated they believe it’s likely there will be another recession within the next five years, and 14% have gone as far as to take their money out of the stock market because of this.

Interestingly, the survey found 19% of retirees were older than 50 when they started saving for retirement, while 35% were younger than 30, 30% were between 30 and 40 and 16% were between 41 and 50.

The most popular way for retirees to stay informed about matters related to retirement is their financial adviser (43%). For people who have yet to retire, it is online research (43%).

“Many Americans—retirees themselves as well as people who have yet to retire—are not taking all the steps they can that will ultimately allow them to make the most of their golden years,” says David Janus, senior vice president, wealth management, First National Bank of Omaha.

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