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U.S. Master™ Pension Guide, 2009 Edition
Revised for 2009 to include relevant provisions of the Heroes Earnings Assistance Relief Tax (HEART) Act and the Emergency Economic Stabilization Act.
from Spencer’s Benefits Reports: The 94% funded percentage of multiemployer pension plans with plan years beginning January 1 through July 1 does not reflect the dramatic stock market downturn of late September, October, and November, according to a Segal Company survey entitled Updated Survey of Plans’ Actual Zone Status. Of the 344 plans studied, 80% have a funding status that is neither endangered nor critical, what Segal terms the “green” zone; 12% of the plans are in the endangered status, or “yellow” zone; and 8% of the plans are in the critical, or “red” zone.
IRC Sec. 432 defines a plan in critical status as one that is less than 65% funded, while endangered status occurs when a plan is between 65% and 80% funded. A plan that is neither critical nor endangered has a funding percentage of 80% or more.
Slightly less than one-third of the plans (32%) had a funded percentage of 100% or greater (110 out of 344 plans). At the other extreme, 16% of the plans (57 out of 344 plans) were in the critical “red” zone.
All nine surveyed plans in the entertainment industry were in the “green” zone (funded better than 80%). The industry with the fewest “green” zone plans was the service industry, with only 63% of its 30 plans well-funded. The largest industry (construction) had 81% of its 193 plans in the “green” zone. The industry with the highest percentage of plans in the “red” zone (critical status) was the transportation industry—15% of the 34 plans were in critical status.
The Segal survey cautioned that “the market volatility experienced in 2008 did not fully affect the actual 2008 funded percentage and zone status of plans included in the survey for two reasons: (1) certifications for the many calendar-year plans only took into account investment performance as of Dec. 31, 2007; and (2) asset smoothing dampened the effect of the downturn for the other plans in the survey. Even without taking into account the dramatic market downturn of late 2008, the survey data indicates that, over the next two years, 10% of green-zone plans may migrate into the yellow zone unless additional actions are taken.”
For more information, visit http://www.segalco.com/publications/surveysandstudies/fall08zones.pdf.
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