Milliman’s midyear 2024 Multiemployer Pension Funding Study is an interim update to our annual study published in the first quarter of the year. This study updates the estimated funding status of U.S. multiemployer defined benefit (DB) plans as of June 30, 2024, showing the change in funding levels from December 31, 2023.
Key findings
- The aggregate market value funded percentage for multiemployer plans is estimated to be 93% as of June 30, 2024, up from 89% at the end of 2023.
- The estimated investment return for our simplified portfolio for the first six months of 2024 was about 5.3%.1
- As of June 30, 2024, 73 plans have received nearly $54 billion in special financial assistance (SFA) under the American Rescue Plan Act of 2021 (ARP), which added 7% to the aggregate funded percentage since the SFA program’s inception.
- The latest Pension Benefit Guaranty Corporation (PBGC) median estimate is that the SFA program will pay a total of about $80 billion to 198 plans.2
Current multiemployer pension funded percentage
Figure 1 shows that the funding shortfall for all plans improved by about $29 billion for the six-month period ending June 30, 2024, resulting in an increase in the aggregate funded percentage from 89% to 93%.
Figure 1: Aggregate funded percentage (in $ billions)
| 12/31/2023 | 6/30/2024 | Change | |
|---|---|---|---|
| Accrued benefit liability | $807 | $815 | $8 |
| Market value of assets | (720) | (757) | (37) |
| Shortfall | $87 | $58 | $(29) |
| Funded percentage | 89% | 93% | 4% |
Based on plans with complete IRS Form 5500 filings. Includes 1,207 plans as of December 31, 2023, and 1,199 plans as of June 30, 2024.
The amounts in Figure 1 reflect nearly $54 billion of SFA paid to 73 plans by the PBGC as of June 30, 2024. Without this, the aggregate funded percentage would be approximately 86%. Looking ahead, the PBGC estimates that the median total SFA payout will be about $80 billion, all of which is expected to be paid by 2027. If all remaining estimated SFA were included in the market value of assets as of June 30, 2024, then the aggregate funded percentage would increase from 93% to 96%. However, this estimated impact of SFA does not factor in the variability and timing of the amount and assumes no changes in plan liability measurements. Future studies will incorporate additional SFA amounts as they are funded.
The liabilities in Figure 1 are projected using discount rates equal to each plan’s actuarial assumed return on assets, which generally fall between 6% and 8%. The weighted average assumption for all plans is about 6.6%.
The assets in Figure 1 are based on each plan’s most recently reported market value of assets, projected forward assuming asset returns observed for a diversified portfolio typical for a U.S. multiemployer pension plan. Our simplified portfolio earned about 5.3% in the first six months of 2024.
Historical multiemployer pension funded percentage
Figure 2 shows the aggregate historical funded percentage of all multiemployer plans since the end of 2007 by the zone status on the latest Form 5500 used for the study. For example, the green line shows the historical funded percentages of plans currently in the green zone without regard to their previous zone statuses. We separately categorized plans that received SFA by June 30, 2024, identified by the gray line. The blue dotted line represents all plans combined.
Figure 2: Aggregate historical funded percentage, by current zone status and SFA
* Data is only used for 69 of the 73 SFA plans. Four of the 73 SFA plans are of immaterial size and are not included in the study.
In the aggregate, the current funded percentage has reached its highest level since 2007. There are 879 plans (73% of all plans) in the green zone. The plans that are not in critical or critical and declining (C&D) status in the aggregate are better funded than they were before the 2008 global financial crisis and continue to weather the ups and downs of the market.
Through June 30, 2024, 73 plans have received SFA. Most of these plans were insolvent or going insolvent in the near future and were in worse financial condition than other plans eligible for SFA. As expected, their funding status improved substantially after receiving SFA. The remaining C&D plans and some critical status plans that are eligible have not yet received SFA as of the date of this study. Their figures will be updated in future studies.
What lies ahead?
In total, the PBGC estimates that about $80 billion in assistance will be paid to 198 plans. This includes the nearly $54 billion that has already been paid to 73 plans as of June 30, 2024. As of August 1, there were another 15 plans approved for approximately $14 billion, plus an additional 23 plans in review and 68 plans on the waiting list. The majority of these plans have locked in a December 31, 2022, measurement date.
The funding status of most plans will continue to be significantly influenced by investment returns. However, new options may now be available to some plans that received SFA, which were not feasible prior to receiving SFA. While SFA alone may not solve their long term concerns, their improved funded percentages combined with changes in plan design and additional contributions could make long-term solvency achievable. Other SFA plans might be able to use the SFA boost to help facilitate a merger with another plan.
As funded status improves, all plans might benefit from changes in investment and funding strategies or plan design. Plans could explore implementing a short- or long-term dedicated bond portfolio as a de-risking strategy, particularly as they mature. If bond rates remain close to a plan’s discount rate, it may be an opportune moment to evaluate and implement such strategies with little impact to the funded status and significantly less investment risk moving forward. Other more minor items can be examined as well, such as increases to the small lump-sum cashout limit to help a plan reduce future administrative expenses.
About this study
The results in this study were derived from publicly available Internal Revenue Service (IRS) Form 5500 data filed through June 2024 for all multiemployer defined benefit plans, numbering around 1,200 plans. Data for a limited number of plans that clearly were erroneous was modified to ensure that the results were reasonable and a sufficiently complete representation of the multiemployer universe. Such adjustments were associated with an immaterial number of plans.
Liability amounts were based on unit credit accrued liabilities reported on Schedule MB and were adjusted to the relevant measurement dates using standard actuarial approximation techniques. For this purpose, each plan’s monthly cash flow, benefit cost, and actuarial assumptions were assumed to be constant throughout the year and in the future. Projections of asset values to the measurement date reflect the use of constant cash flows and monthly index returns for a simplified portfolio composed of 22.2% U.S. stocks, 9.9% international stocks, 11.6% global equity, 18.2% U.S. fixed income, 0.4% global or international fixed income, 0.9% cash, 12.3% private equity, 4.0% private credit/debt, 9.7% real estate equity, and 10.8% alternative investments. This asset portfolio is the average asset mix as of September 30, 2023, for the top 1,000 union-defined benefit plans, as reported in the February 12, 2024, issue of Pension & Investments.
Changes to an individual plan’s data or assumptions would likely not have a significant impact on the aggregate results or the conclusions in this study.
This study reports on funded percentages and levels based on one reasonable measure of funding for these plans, where liabilities are developed using each plan’s assumed return on assets as the discount rate. Other methods of measuring liabilities and funding statuses may produce different results.
1 Individual plans’ returns may have been higher or lower based on their asset allocations, asset classes, and management styles. For more information about the asset portfolio used for this study, see the section “About this study.”
2 Pension Benefit Guaranty Corporation (2023). FY 2023 Projections Report. Available at: https://www.pbgc.gov/sites/default/files/documents/fy-2023-projections-report.pdf.