May 21, 2012
--- Multi-employer pension plans are still facing
formidable funding challenges, according to Segal’s latest zone-status survey. ---
Although multi-employer plans
experienced generally strong market performance in late 2009 and 2010, overall
investment performance was relatively poor in 2011 because of continued market
volatility. Consequently, the investment losses of 2008 and early 2009, in
conjunction with the lackluster 2011 investment results, had an impact on most
The proportion of calendar-year
multi-employer pension plans in the green zone declined by four percentage
points between January 1, 2011, and January 1, 2012, from
66% to 62%. The survey shows that the average Pension Protection Act of 2006
(PPA'06) funded percentage for those plans decreased by three percentage points
over that period, from 89% to 86%. Before the market downturn that began in
late 2008, more than three-quarters of calendar-year plans (83%) were in the
green zone and the average funded percentage was 97%.
In the previous year’s survey, only 3% of the plans that
were certified as green were projected to migrate into the yellow or red zone.
Unfortunately, the plans’ projected zone status has deteriorated somewhat since
then. Data from this year’s survey indicates that, over the next few years, 13%
of the plans that were certified as green are projected to migrate into the
yellow or red zone.