SOA Papers

Four papers from the Society of Actuaries (SOA) just dropped:

U.S. Single Employer Pension Plan Contribution Indices, 2009-2015

U.S. Multiemployer Pension Plan Contribution Indices, Updated Through 2015

U.S. Multiemployer Pension Plan Stress Metrics: Previous Benefit Cost and Previous Benefit Cost Ratio

U.S. Multiemployer Pension Plan Withdrawals, 2009-2015 (PDF)

Taking 5500 data off the DOL website yielded these observations from the SOA with my notes in (brackets):

In 2015 there were approximately 38,000 Single Employer Defined Benefit Plans covering nearly 29 million participants (though ‘one-participant’ plans are not public information so there are likely an additional 10,000 very well-funded plans).

Using smoothed rates per current funding rules for single employer plans (with the higher segment rates per MAP-21 and later HATFA changes to PPA), the total liability for 2015 of $2.0 trillion was 99% funded, with an aggregate unfunded liability of about $25 billion.

Using unsmoothed rates and the market value of assets (basically PPA rates), the authors estimate the total liability for 2015 to be $2.7 trillion with an unfunded liability against the market value of assets of about $380 billion, or 86% funded.

Aggregate unfunded liabilities (for multiemployer plans) increased slightly from about $129 billion for 2014 to about $133 billion for 2015, when measured with the actuarial discount rates, cost and asset methods used for funding purposes (the phony ones).

Using Current Liabilities, which are computed with much lower (and more honest RPA) discount rates that vary from year to year, unfunded liabilities increased from $496 billion in 2014 to $535 billion in 2015.

A (multiemployer) plan’s Previous Benefit Cost (PBC) represents the annualized cost of funding its unfunded liability per active participant. The median PBC using funding (phony) discount rates was -$621 for 1999, indicating a small funding “suplus” rather than an unfunded liability. The median peaked at $3,799 for 2009 and has generally declined since to $2,119 for 2015.

Using Current Liability (the RPA more honest) discount rates, median PBCs generally increased since 1999 – from $465 in 1999 to $8,004 in 2009 to $11,271 in 2015, almost five times its funding discount rate equivalent. Current Liability PBCs generally continued to increase after 2009 while funding discount rate PBCs generally decreased, primarily because Current Liability discount rates steadily fell while funding discount rates stayed the same or fell only slightly. Lower discount rates generate greater liabilities, hence greater unfunded liabilities.

On average over 2009-2015, 1.2% of all participating employers (in multiemployer plans) withdrew annually, affecting 18% of plans which covered 63% of all participants. While the rate of withdrawal was roughly the same between construction and non-construction plans, a greater percentage of participants in non-construction plans were affected than the percentage of participants in construction plans.

3 responses to this post.

  1. Posted by Tough Love on February 1, 2018 at 11:20 pm

    If I recall correctly, the average funding ratio for Public Sector DB Plans is in the mid-low 60s% range when valued using the ultra-liberal “official” assumptions and methodology. If they were valued on the SAME basis as that used for Private Sector Plans (i.e. the one that yielded the 86% in Mr. Bury’s Post above) those mid-low 60s% would drop to about 45%…… slightly above HALF as well funded as are Private Sector Plans (at 86%).

    When a Private Sector Plan’s funding ratio drops below 60%, the Plan is considered in such poor shape that it is barred from granting future service accruals. That being the case, then WHY when Public Sector Plans have an average funding ratio of about 45% (when calculated on the SAME basis) are they still allowed to credit additional future service accruals?

    Answer…….. because the Public Unions and our Elected Officials that granted these ludicrously excessive pensions (that being the ROOT CAUSE of the low funding ratios) constitute a racketeering enterprise with BOTH looking at the Taxpayers as the “suckers” to pay for it.


  2. Posted by Tough Love on February 2, 2018 at 12:12 am

    I Posted this on Mr. Bury’s previous Blog-post but am re-posting here because it adds substantively to the focus of this Blog.


    A frequent contributor to Pensiontsunami is Leo Kolivakis and today’s post is titled “America’s Pension Shithole? “. You can find it here:

    The entire commentary is VERY worthwhile reading, but ESPECIALLY the part that starts about 2/3 of the way down with:

    “Update: A wise reader of my blog shared this with me (added emphasis is mine): ”


  3. Posted by Tough Love on February 2, 2018 at 11:03 am

    Here’s a VERY interesting (and accurate) take-away from actuary Mary Pat Campbell’s commentary on Illinois $107 Billion POB proposal.

    Source …

    A POB will not fix the inherent problem Illinois has: it cannot credibly pay off the promises it has made.

    What a POB will do is cram a bunch of cash into the pensions, that would be impossible for the state or bondholders to claw back. There’s a fake arbitrage to give it the veneer of “savings”, but the whole plan is to shove money into pensions.

    Who cares what happens to the bondholders? The bondholders can look out for themselves, right?

    I assume no bond insurer will come within a mile of such an offering.


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