Segal Company Reports on Multiemployer Pension Funding Levels and Investment Performance
The average funded ratio of multiemployer pension plans (MEPPs) remains relatively high despite a significant decrease in the percentage of plans that are fully funded, according to The Segal Company’s latest Survey of the Unfunded Position of Multiemployer Plans.
According to Segal Company, a large actuarial and consulting firm, this ratio is particularly impressive in the wake of the so-called “perfect storm” caused by three consecutive years of disappointing equity market returns coupled with the computation of liabilities at record low interest rates. The survey examined 447 plans, about one quarter of all MEPPs, with combined assets of over $132 billion and 4.4 million participants. The survey was recently released survey is generally based on data that date back to plan years ended in 2001 or 2002. Therefore, the results do not reflect significant improvements in equity markets or the continued decline in interest rates in 2003, Segal Company noted.
The survey found that the average funded ratio – the ratio of assets to benefits – was 87 percent, as compared to 95 percent in the 2002 survey. It found that plans with the largest and the smallest number of participants had the highest average funded ratios. In the construction industry, the average funded ratio was 86 percent, down from 95 percent. Only 31 percent of surveyed plans were fully funded (100 percent) for their vested benefits, a considerable decline from 67 percent in the 2002 survey.
Segal Company expects that changing participant demographics – i.e., a higher ratio of retires to active plan members – will become an increasing concern for MEPPs. The company projects that next year’s report will reflect a “mixed” environment of record low interest rates but a healthy recovery in investment markets. According to the latest Survey of the Universe of Multiemployer Pension Funds’ Investment Performance released by Segal Advisors, an affiliate of The Segal Company, the median investment performance of tracked MEPPs was 17.2 percent in 2003. This is a sizeable improvement over the 8.2 percent median loss in 2002. The 2003 return includes an impressive 31.4 percent return on equity investments and a 5.1 percent return on fixed-income investments.
Click here for more information about the survey of funded positions and a link to the full survey report. Click here for more information about the survey of investment performance and a link to the full survey report.
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