The Building Tradesman Newspaper

Friday, September 06, 2013

Pension plan patients growing healthier

By The Building Tradesman

Multiemployer pension plans such as those that cover the building trades are healthier since the depths of the Great Recession, but have a ways to go before they rebound to levels from five or six years ago.

So says Segal Consulting, which recently released a report on the “Zone Status” of multiemployer plans. So-called “green zone” plans – more than 80 percent funded – decreased slightly from 62 percent in 2012 to 61 percent this year. But the percentage is up significantly from 54 percent in 2010 and 34 percent in 2009. The high water mark in recent years was Jan. 1, 2008, when 83 percent of plans were in the green zone.

“Specific rehabilitation efforts by trustees as well as improved investment performance in 2012 were key reasons for the long-term improvement,” said David Blumenstein, Segal’s senior vice president and national multiemployer market director.

The average Taft-Hartley pension fund annualized investment return from 2009 to 2012 was 13.4 percent, significantly exceeding multiemployer plan investment return assumptions. The Segal report said the construction industry has the greatest percentage of plans in the green zone, with the entertainment industry close behind.

Segal said 11 percent of multiemployer plans were in the yellow zone, a number unchanged from 2012 to 2013. For troubled red zone plans, those under 65 percent funded, Segal said the percentage ticked up from 27 percent last year to 28 percent in 2013.

Randy DeFrehn, executive director of the National Coordinating Committee for Multiemployer Plans, told delegates to the Michigan Building and Construction Trades Council last month that “our plans remain one of the shining features of collective bargaining since World War II.”

He said there will be a bill introduced into Congress in the next few months that will change accounting rules and other changes to help multiemployer plans stay healthy in the future. Part of the proposal Congress will consider is a plan developed by representatives from labor and management. It would make allowances to help new employers enter into multiemployer plans without putting them on the hook for past pension obligations that their company was not involved in. One huge Teamster pension plan, especially, could use such relief.

“We have models that will help you recruit new employers to the system,” DeFrehn said. The changes would help keep troubled multiemployer plans from seeking a taxpayer bailout. “We need this relief. When you’re in a hole, stop digging,” DeFrehn said.

The construction industry has the greatest percentage of plans in the green zone, with the entertainment industry close behind.