How we got here
A combination of forces have battered the Plan’s finances and threaten its survival:
- The inactive to active participant ratio. The number of retired participants, combined with inactive participants who have earned a benefit but no longer contribute to the Plan, far outweighs the number of active participants—by an 8 to 1 ratio. This is mainly due to the following factors:
- A spike in the number of terminated vested participants due to the 2008 recession and slow economic recovery.
- A substantial number of employer withdrawals that have occurred since the Plan was first certified as "critical and declining."
- A higher-than-expected number of participants retired when the Plan was first certified as "critical and declining," before the initial 2010 Rehabilitation Plan changes took place.
- The number of contributing employers. Employer contributions are a critical source of Plan funding. However, due to the recession and subsequent slow economic recovery, the number of employers contributing to our Plan is significantly down, from 280 in 2008, to just 180 in 2016. And, while employers exiting the Plan are required to pay withdrawal liability, there is a dwindling level of “new money” coming into the Plan.
- The number of active participants. The number of active participants is significantly down from 2008—by 62%. Fewer active employees mean fewer ongoing contributions coming into our Plan to fund future benefits earned.
- Short-sighted federal laws. Government regulations for multiemployer pension plans, like ours, have made it difficult for the Plan to save for a financial crisis, and to retain and bring new employers and active participants into the Plan.
- Investment returns. The Plan invests its assets and uses investment returns as one source for paying benefits. We suffered huge losses (-32%) in 2008 due to the stock market crash; subsequent returns through 2016 have not achieved the expected results. And we are not alone—the Great Recession impacted multiemployer pension plans across industries*:
- Average investment losses in 2008 were close to -23%.
- The average plan funding ratio dropped from 89% in 2008 to 65% in 2009.
- The number of “Red Zone” plans jumped from 9% in 2008 to 42% in 2009.
To sum it up, the effect of losing contributing employers and active participants was compounded by many Pension Plan participants retiring. The Plan is now overly reliant on market returns and vulnerable to market fluctuations.
*National Coordinating Committee for Multiemployer Plans, Multiemployer Pension Plans: Main Street’s Invisible Victims of the Great Recession of 2008. April 2010.