SOA Critical & Declining Plans

Alicia Munnell sees the multiemployer problem as all Central States and there should be a bailout. So a new report published by the Society of Actuaries (SOA) exploring the projected impact of pending insolvency on 115 “Critical and Declining” multiemployer pension plans is most welcome.

I did something similar last year and found only 82 plans in that category which is about what the Department of Labor reports on their website.

Since the SOA report lists the names of those plans with their EINs and I have a spreadsheet of all multiemployer plans from 2015 Schedule MB data (which also includes asset and liability information) I decided to put the names to the EINs and check their numbers.

I added these ten plans:

which got me these worksheets (sorted by EIN). Using RPA (realistic) actuarial assumptions here are the summaries.

Using rates for funding (and I use the term loosely) here are the better-looking summaries with actuarial replacing market value of assets and liabilities left to the whims of the actuaries (which usually coincide with those of their clients).

Finally, here are the plans sorted by funded ratio which is the best barometer of who goes first. You will notice that Central States, though by far the largest in terms of assets and liabilities (37% of this group of 125), falls in the middle as far as funded ratios go. Of the 1,240 total plans Central States makes up 3.8% of assets and 5.2% of liabilities.

It is also noteworthy that there are several large plans not on this list (including the Western Conference of Teamsters Pension Plan) because they are considered ‘nonendangered’, even though they have tens of billions of dollars of unfunded liabilities.

16 responses to this post.

  1. Posted by Tough Love on May 23, 2018 at 8:17 pm

    Your differences in funding ratios if using the RPA rate (3% to 3.5%) vs the plan’s “official” rate (usually in the 7% to 8% range) to discount Plan liabilities is right in line with many of my comments on this Blog ………….. that the “official” funding ratio will drop by about 1/3 when using the RPA rates. (The RPA rate being the rate used in Private Sector Plan valuations).

    Note to El gaupo …………… your Plan’s “official” funding ratio in the high 60s% drops to about 45% when using the SAME assumptions required of Private Sector Plans in their valuations.

    Give that some thought. Do you thing America’s big Corporations are stupid and would put up with being forced to use a rate that is unreasonably conservative (and requiring HIGHER contributions)? Of course not, having lobbyists to prevent it where necessary. They haven’t challenged the RPA rate because they know that for the purpose of valuing pension Plans liabilities (with a high level guarantee of being paid) such conservative rates are indeed appropriate.

    The Treasury/IRS also considers Private Sector Plans whose Funding ratio (using the RPA rate) falls below 60% to be in such poor shape that they are barred from granting further accruals.

    When using the RPA rate, YOUR Plan is about 25% (45% vs 60%) BELOW that CRITICAL cutoff level……………… and it means squat that the OTHER State Plans are in worse shape. It’s a bit like a group of people falling off a high roof, and the one who will hit the ground last yelling …. “boy are you guys screwed**.

    One big economic downturn and your Plan is toast.


    • Posted by El gaupo on May 24, 2018 at 7:41 am

      Plans actually have returned over 7% so far to date. A big economic downturn already happened in the last ten years. It led to some shaky years for sure. That also was true for folks w dc plans. Like myself. The smart ones left things alone. The jittery ones got screwed in the long run. I had two guys I work with get scared and sold at the lowest point all their growth shares. Disastrous results. Never made the money back while the patient ones were ok. But look what happened. We had folks on this blog saying repeatedly to put everything in gold. Wow. How would that have worked out?? If it ever gets to that point, may I suggest another precious metal to invest in. Lead. As in bullets. Cause if the economy is that bad you’re gonna need them. Lol. Fortunately, we never came to that.
      Look, those two are the type to buy insurance when playing blackjack and the dealer shows an ace!! It may seem like a safe bet, but in fact will cost you in the long run. And You have no business gambling if you feel the need to buy insurance. Likewise, if you are foolish enough to not ride out variations in the market as your age dictates you should then you might as well leave your dough in a savings account. Which is fine, but then don’t come to me when my 457 is double yours because I knew the market would come back and left my stuff where it was and added to it. By buying low. Still not worried about Pfrs.
      Will my answer be different in 2030? Maybe. I’ve olanned for that just in case. But I think I’ll be just fine for years to come.


      • Posted by Tough Love on May 24, 2018 at 8:43 am

        Quoting …………….”That also was true for folks w dc plans.”

        What a load of BS. Unlike YOUR DB Plan, those who lost money in DC Plans have no 3-rd party “sucker” (in your case, the Taxpayers) to make up for THEIR losses.

        Unlike NJ’s PRIVATE Sector taxpayers (very few of whom are currently accruing pensions in a Final Average Salary DB Plan), the $1.5 to $2 Million value of your DB Plan is indeed FULLY INSURED …. by NJ’s Taxpayers.

        Another example of the Public Sector’s financial “mugging” of NJ’s Taxpayers.


        • Posted by El gaupo on May 24, 2018 at 12:03 pm

          No. They don’t. Which is why I’m a perfect world Db pensions would be more popular. But, they do have time. The point I was trying to make is that most people saw their 401k come back and then some.


          • Posted by Tough Love on May 24, 2018 at 3:44 pm

            More BS. Either you’re playing dumb, or dn’t understand the math.

            When it takes you 8 years (2017-2009) for your 401k to COME BACK to the SAME $$ amount you started with, you have earned NOTHING over that 8 year period ………. yet over that SAME 8 year period, even though your pension Plan’s assets suffered the SAME drop ….. the way it works is that your Plan was assumed to STILL make the Plan’s “official rate” (7% to 8%) with NJ’s Taxpayers being the ones called upon to make up for those phantom asset returns that never materialized.

      • Posted by Tough Love on May 24, 2018 at 9:08 am

        Expressed differently, the US Gov’t STOPS future pension accruals when Private Sector Plans have an RPA-rate-calculated Funding Ratio below 60% because the Plans have a VERY strong change of NOT being able to honor their pension promises and they don’t want the PBGC (and possibly the US Gov’t itself meaning it’s Taxpayers if the PBGC itself goes bankrupt) to be left holding the bag.

        Why should NJ’s Taxpayers get LESS protection than what the Federal Gov’t demands for itself?

        YOUR Plan, with a 45% funding ratio (if calculated using the RPA rate) being (45% vs 60%) 25% BELOW that 60% Federal cutoff to shut-down further accruals, should have been shut down years ago.


        • Posted by El gaupo on May 24, 2018 at 9:39 am

          Well according to tom Byrne the funds have turned a corner and will be just fine. Bullshit I know. But this is the same guy who just last year said we need to commingle the funds and stop future accruals. Why the turn about? I know why. Murphy vs Christie. But it begs the question— when he was kissing both their asses to keep his own job, was he right the first time or the second? Lol. The math shows a depletion date of almost 40 years away for Pfrs. Again, not worried. Maybe I am like the morons who buy insurance at blackjack. I save extra money “just in case”. Lol. But unlike gambling, I don’t look at my financial future investments as “just for fun”. But as of 2018, I beleive I will not have my pension cut at any point in my retirement. The numbers may not work as well for other funds. I think I may die on that roof you were talking about. Hopefully, at a ripe old age. The same I wish for you. Like you, I am a little more interested in this stuff ban the average joe. Doesn’t mean I don’t fully enjoy life and I will be thrilled when I don’t have to keep all you guys in line anymore. 😛. Looks like 30 for me though….
          our time on earth is too short to worry all the time ability what if’s and maybes.


        • Posted by El gaupo on May 25, 2018 at 8:57 am

          If you were young and invested in a 401k during the recession, you were buying low and in many cases saw your investments triple in price from 09-16. Pretty good. If you were older or retired you should have been in conservative investments anyway that would not have gone down nearly as much if at all. While still dabbling to take advantage of low prices.
          I certainly am not saying a DC is as good as a DB by any stretch. Just saying that most folks a good number of years away from retirement have more than recovered and the only horror stories I’ve heard were with people who mismanagaed their 401k (never intended to replace a pension). I just read yesterday that 40% of households would have to sell something or take a loan to pay a $400 emergency bill and 25% of households do not have a single penny saved for retirement. These folks will need to work probably until age 70 or more. Hanging in and driving wages down for kids coming out of college. What to do with these folks?? We see folks of limited means blow $40-50 a week on lottery tix instead of investing that money. Retirement was a different animal 60 years ago. Retired people scaled down their lifestyle. No cruises or big vacations as the norm etc. and they usually were dead within 10 years. Now they live 30 and want to live well(nothing wrong with that just saying).


          • Posted by Tough Love on May 25, 2018 at 9:15 am

            El gaupo,

            You pick and choose dates and ages to support the conclusion you desire.

            And quoting …….

            “If you were older or retired you should have been in conservative investments anyway that would not have gone down nearly as much if at all”

            You are older and just a few years from retirement. Does YOUR DB Plan have to “invest conservatively” ? No, EVER, because when the market goes south you simply tell the taxpayers that THEY must make up for YOUR Plan’s losses ……. as well as their own.

            Again, a financial “mugging” of the Taxpayers by NJ Public Sector workers.

  2. Posted by geo8rge on May 24, 2018 at 10:24 am

    It would have been nice to see a column showing the PBGC liability based on current maximum PBGC benefits. I suspect some of the less well paid pensions just assumed at some point they would end up being taken over by the PBGC and let the pension assets go to $0.

    At the joint select committee meeting I thought they said the PBGC would need just $1.6 billion a year for a decade. Where did that number come from and is it correct?

    I think they should bailout the PBGC based on current maximum benefits, and then discuss if larger pensions should be given further bail outs on a case by case basis. Or convert the uninsured amounts to a pay as you go plan and vote on them yearly.


  3. […] free money then what is to stop every multiemployer plan from wanting some? There are supposedly 115 critical and declining plans but if federal money is on the table and actuarial assumptions for classifying status remain […]


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