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Most building trades pension plans are healthy, but negative numbers lurk

Date Posted: January 16 2009

A survey released in December on the financial status of multi-employer pension plans - such as those that cover building trades unions - finds an increasing number of patients on the sick list, but an overall healthy population.

The survey found that 80 percent of all surveyed plans are in the "Green Zone," meaning they are more than 80 percent funded. Also revealed by the survey: 12 percent of plans are in the "Yellow Zone" for funding (less than 80 percent funded or a projected funding deficit within seven years). And, 8 percent of multi-employer plans are in the "Critical/Red Zone," with less than 65 percent funding and either a projected funding deficiency within five years or a projected inability to pay benefits within seven years.

However: the survey did not take into account the affect of this fall's market losses. "The market downturn," the Segal survey said, "which has been more dramatic following the period (as late as September) when all the certifications for plans were due, is expected to continue to have a negative impact on future survey results…."

The Segal survey combined both calendar year plans (January through December) and non-calendar-year plans (e.g. June through June). Compared to the last available calendar report at the end of 2007, the "Green Zone" plans had dropped from an 83 percent funded level.

In other findings:

  • The survey did not break down the plans by specific international union, but by general industry. Construction fared relatively well: 81 percent of union plans are in the Green Zone, with 13 percent in the Yellow Zone and 6 percent in the Red. Transportation (71 percent of plans were in the Green Zone), and Service (63 percent of plans in the Green Zone) were in worse shape.
  • The Entertainment category for multi-employer plans were in the best shape: 100 percent of plans were in the Green Zone.
  • Even without taking into account the dramatic market downturn of late 2008, the survey data indicates that, over the next two years, 10 percent of green-zone plans may migrate into the yellow zone unless additional actions are taken (up from 7 percent in the survey of only calendar-year plans).

    • As we reported last month, those "additional actions" were laid out in a letter to Congress by the Multi-Employer Pension Plan Coalition, which includes building trades unions, employers and business groups. Members of the coalition were seeking more time for pension funds to improve their funding position through hoped-for improvements in the stock market and construction man-hours worked. (They received some more time - see the front page article).

    In 2006, Congress adopted the Pension Protection Act, which was designed to improve the health of pension plans by introducing benchmarks - and penalties if they are not met during given time limits- in order to improve the solvency of the plans.