For the people who looked at the headline and said, “What pension?” this post is not for you. However, there are some of you pros out there whose companies still maintain defined benefit plans, and new stats from the International Foundation of Employee Benefit Plans show that 73% of multiemployer pension plans report they are less than 80% funded.
This bit of news makes me cringe because, as you know, PPA requires multiemployer DB plans to certify their funding status each year. A plan meets “safe” status (aka, in the green zone) if it’s at least 80% funded. Plans less than 65% funded are deemed critical (red zone), and endangered (yellow zone) or seriously endangered (orange zone) plans fall somewhere in the middle.
What a difference a recession makes. Although in 2008, 75% of respondents’ plans were safe, and only one in ten (11%) were critical, just 27% of plans currently are in safe status and 37% are critical.
Under PPA, plans certified as critical must create a rehabilitation plan. To provide DB plans temporary funding relief, the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) provides an alternative option — taking a one-year funding status freeze, an option 54% of IFEBP respondents are taking advantage of.
Of the plan sponsors not taking the freeze option, most say it’s because they don’t want to delay taking steps to improve their funding status (78%).
