The aggregate funded percentage of U.S. multi-employer pension plans dropped to 79 per cent in 2022, from 91 per cent in 2021, according to a new report by consulting firm Milliman Inc.
It found the decrease was largely the result of significant investment losses during 2022, despite the first wave of special financial assistance funding provided by the U.S. federal government. In 2022, 35 MEPPs received $9 billion in special assistance funding, while an additional $37 billion was paid out in January 2023, with the majority going to the Central States, Southeast and Southwest Areas Pension Plan.
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The report noted the U.S. Pension Benefit Guaranty Corp. estimates an additional $28 billion to $45 billion in assistance is expected to be paid out between 2023 and 2025.
“The [special assistance funding] has been vital for multi-employer plans in dire financial conditions; however, the underlying conditions for these plans have not changed,” said Tim Connor, a principal at Milliman and co-author of the report, in a press release. “They continue to be very mature, have high negative cash flow and depend highly upon asset performance. Investment returns will continue to be a driving factor to sustain these plans for the long term.”