Administration May 11, 2010

Multiemployer Plans Suffered from Downturn Too

May 11, 2010 (PLANSPONSOR.com) – A survey released by a Washington, D.C. trade group representing multiemployer plans said the value of assets in those plans plummeted an average of 22.1% from the beginning of 2008 to 2009.
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In a report on its survey and a news release announcing the findings, The National Coordinating Committee for Multiemployer Plans (TNCCMP) argued that its members had suffered every bit as much as other pension programs from the economic downturn and need Congressional funding relief as much as other pension plans. Any “fix” has to take into account the unique structure of the plans and be designed to help them survive over the long term, the group contended.

“We must realize that market volatility is part of the equation and that, in addition to structuring investment portfolios to weather normal, short-term volatility, multiemployer defined benefit pension plans are going concerns for which investment horizons and the recognition of extraordinary gains and losses must be appropriately structured,” the report stated. “The regulatory framework must not just enable the plans to endure, but must also respect the delicate balance between adequate pension funding and the economic viability of the contributing employers. “

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The poll of 392 multiemployer plans about their financial health from 2007 to early 2009 also found that the portion of plans that Pension Protection Act (PPA) considers healthy declined from over 75% when the initial certification was done when the PPA became effective in 2008, to 20% in 2009. More than 40% of the plans reported their PPA funding zone status as red/endangered  by 2009.

At the beginning of 2008, the average plan responding to the survey was approximately 90% funded on a PPA basis, while by the beginning of 2009 this figure declined to approximately 77%.

The survey also found:

  • Asset allocation for the 2007 to 2009 period found equities comprised about 50% of the average portfolio, with fixed income at about 30%, real estate 8%, and “other”, cash, hedge funds, and private equity all comprising less than 10% in total.
  • During 2007, nearly half of the plans responding to the survey reported an actual investment return of between 5% and 10% with a median reported rate of return of 7.9%. More than 50% of the responding plans recognized a 2008 asset return of -20% or worse, with a median reported loss of -22.1%.

The survey report is available here. 

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