The preliminary results of the “Survey of Calendar-Year Plans’ 2014 Zone Status,” released by Segal Consulting, indicate the percentage of calendar-year multiemployer pension plans in the “green zone” in 2014 is 65%, an increase of 4 percentage points from 2013.
In addition, the percentage of plans in the yellow and red zones are down from last year, with those in the yellow zone at 8% (compared to 11% last year) while those in the red zone declined to 27% (compared to 28% the prior year).
The survey, which reflects data from more than 215 calendar-year plans, also revealed that for the fifth consecutive year, more than half the surveyed plans are in the green zone. Further, both the construction and service industries have the greatest percentage of plans in the green zone, both at 73%.
Data shows that between 2013 and 2014, the surveyed plans’ average Pension Protection Act (PPA) funded percentage increased by 3 percentage points to reach 88% from 85% in 2013.
Segal says factors contributing to the recent improvement include:
- Very strong investment performance—for 2013, the return for multiemployer pension funds with a 40% to 70% allocation to equities ranged from 11.5% to 21.4%;
- Trustees have taken steps to strengthen their plans, including making plan design changes and negotiating contribution rates; and
- There are higher levels of employment in many industries.
The term “green zone” refers to multiemployer pension plans that have an actuarial certification of their projected funding status that is neither endangered (the yellow zone) nor critical (the red zone) under the funding provisions of the PPA. Plans in the green zone are not subject to special rules put into place by the PPA. In contrast, trustees of plans in the yellow and red zones are required to take specific actions to improve their plans’ financial status by adopting a funding improvement plan or rehabilitation plan, respectively.
Zone status is determined by an actuarial certification based on a projection of estimated assets and liabilities, according to the survey. For calendar-year plans, the projection is based on January 1, 2014, assets (reflecting investment performance for 2013) and liabilities.
A full report of the survey results will be released in May. An infographic featuring survey data is here.