Multiemployer Pension Funding Bleak, But Improving
Milliman recently released an interim update to their annual study analyzing multiemployer pension plan funding status published in the first quarter of the year. The addendum includes information and analysis as of June 30, 2020. The study found that economic volatility due to the COVID-19 pandemic has resulted in drastic swings in funding status. The study estimates the aggregate funded percentage for multiemployer plans to be 82% as of June 30, 2020, down 3% from the end of 2019. This represents a $26 billion increase in funding shortfall from the end of 2019, for a total shortfall of $133 billion. The study’s simplified portfolio earned about -1.3% in the first half of 2020, which was a stark increase from the lowest monthly return of -13.4% in March 2020. Due to this negative return, plans in critical and declining status face downturned funding statuses.
While funding looks bleak, the health of plans is likely improving. The study estimates that the funding shortfall in March 2020 was $200 billion with a funded status of 72%. Additionally, proposed legislation may address the funding crisis, should the Senate consider the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act that was recently passed by the House of Representatives.