Milliman analysis highlights the
stormy ride thus far in 2020 for
multiemployer plans
Milliman’s June 2020 Multiemployer
Pension Funding Study is an interim
update to our annual study published in
the first quarter of the year.1
This study updates the estimated funded status of U.S.
multiemployer plans as of June 30, 2020, showing the change in
funding levels from December 31, 2019.
Key findings
- The estimated investment return for our simplified portfolio
for the first six months of 2020 was about -1.3%, a significant
recovery from the -13.4% return at the end of March.
- The aggregate funded percentage for multiemployer plans is
estimated to be 82% as of June 30, 2020, down from 85% at the
end of 2019.
- The market volatility and economic uncertainty associated
with the COVID-19 pandemic has resulted in dramatic swings
in plans’ funding status over the last six months.
- While all plans absorb market gains and losses over time,
extreme market movements immediately prior to a plan’s
measurement date can have a significant impact on its
funding position and annual Pension Protection Act (PPA)
zone status.
Figure 1: Aggregate funded percentage (in $ billions)

Based on plans with complete IRS Form 5500 filings. Includes 1,249 plans as of
December 31, 2019, and 1,245 plans as of June 30, 2020.
Current funded percentage
Figure 1 shows that the funding shortfall for all plans rose by
about $26 billion for the six-month period ending June 30, 2020,
resulting in a drop in the aggregate funded percentage from
85% to 82%.
A key assumption here is the discount rate used to measure
liabilities, with each plan using its actuary’s assumed return
on assets. Assumed returns generally fall between 6.0% and
8.0%, with a weighted average interest rate assumption for all
plans of about 7.0%. This analysis also uses the market value
of assets, which paints a clearer current financial picture than
using smoothed “actuarial” asset values.
Historical funded percentage
Figure 2 shows the aggregate historical funded percentage of
all multiemployer plans since the end of 2007 by their current
zone statuses. For example, the green line shows the historical
funded percentages of plans currently in the green zone
(without regard to previous zone statuses). The blue dotted line
represents all plans combined.
Figure 2: Aggregate historical funded percentage,
by current zone status

Over the past 18 months, increased volatility in the markets has
caused dramatic swings in the aggregate funded percentage
for most plans. Our simplified portfolio earned about -1.3%
in the first six months of 2020, but the return was as low as
-13.4% through March 2020. Plans in critical and declining
status continue to see their funded statuses creep downward
over time regardless of the market’s recovery. This is because
investment returns apply to smaller asset values as well as some
plans earning lower returns due to shifts in policy to invest in
safer, lower-return investments in an effort to preserve capital
as long as possible. The funded percentage of noncritical
and declining plans continues to be almost entirely driven by
investment performance.
Measurement dates matter
The numbers in Figure 1 above show the snapshot funded
statuses for all plans as of this study’s customary semiannual
dates (December 31 and June 30). While the decrease in funded
status is concerning, it is worth noting that intermediate figures
as of March 31, 2020, were substantially worse. We estimate the
funding shortfall as of March 31, 2020, was approximately $200
billion with a funded status of 72%. While the bounce-back
from the bottom of the market in March is welcome news, 70
plans have the misfortune of having a March 31 plan year-end
date. In their cases, annual valuations and zone certifications
will include asset values measured at the worst possible time
so far this year. Calendar year plans will be crossing their
fingers that the recovery continues although, as discussed in
recent
articles,2, 3 the path of the pandemic moving forward
remains uncertain.
Figure 3: Number of plans by plan year end

Impact of the economy
The market volatility associated with the COVID-19 pandemic
and the slow and inconsistent nature of states reopening from
the shutdown leaves the future of multiemployer plans in a
tenuous position. Some industries, such as hospitality, have
been devastated by recent lockdowns, with some businesses
closing for good. Other industries, such as construction, have
weathered the storm so far, and are hopeful that work levels
do not undergo declines in the next year or two once existing
projects are completed.
What lies ahead?
Lawmakers have been active in passing stimulus legislation to
help the economy and provide financial assistance to individuals
who have lost their jobs. The plight of multiemployer plans has
not gone unnoticed, with the House of Representatives passing
the Health and Economic Recovery Omnibus Emergency
Solutions (HEROES) Act on May 15, 2020.4 The act contains
several proposals to address some of the challenges for
multiemployer plans. However, the Senate has yet to consider
the HEROES Act or introduce its own version of a bill. Once all
ideas are on the table, Congress will need to find a bipartisan
solution to the multiemployer pension crisis. What that will
look like remains in question.
The last six months have been extremely turbulent and while
the market has recovered some, there remains considerable
economic and political uncertainty ahead.
About this study
The results in this study were derived from publicly available Internal Revenue Service (IRS) Form 5500 data as of June 2020 for all
multiemployer plans, numbering between 1,200 and 1,300, depending on the measurement date used. Data for a limited number of plans
that clearly appeared to be erroneous was modified to ensure the results were reasonable and a sufficiently complete representation of the
multiemployer universe.
Liability amounts were based on unit credit accrued liabilities reported on Schedule MB, and were adjusted to the relevant measurement
dates using standard actuarial approximation techniques. For this purpose, each plan’s monthly cash flow, benefit cost, and actuarial
assumptions were assumed to be constant throughout the year and in the future. Projections of asset values to the measurement date
reflect the use of constant cash flows and monthly index returns for a simplified portfolio composed of 45% U.S. equities, 20% international
equities, and 35% U.S. fixed income investments.
Significant changes to the data and assumptions could lead to much different results for individual plans but would likely not have a
significant impact on the aggregate results or the conclusions in this study.
1The Multiemployer Pension Funding Study of December 2019 is available
at https://us.milliman.com/en/insight/
multiemployer-pension-funding-study-december-2019.
2Coffing, K.S., Connor, T.L., & Lantz, N.M. (April 2020). COVID-19 to Leave
Multiemployer Pension System More Distressed Than Ever. Milliman
Multiemployer Review: https://us.milliman.com/en/insight/covid-19-toleave-
multiemployer-pension-system-more-distressed-than-ever.
3Preppernau, L.E. & Vaughn, C. (March 2020). Can
Multiemployer Pension Plans Survive COVID-19? Milliman
Multiemployer Alert: https://us.milliman.com/en/insight/
multiemployer-alert-can-multiemployer-pension-plans-survive-covid-19.
4Milliman Multiemployer Alert (May 2020). Multiemployer Relief in HEROES
Act: https://milliman-cdn.azureedge.net/-/media/milliman/pdfs/articles/
multiemployer-alert-heroes-act.ashx.