Segal Survey of Plans' 2012 Zone Status
February 27, 2013
A report of results of our latest zone-status survey of multiemployer pension plans, Survey of Plans’ 2012 Zone Status, is now available on the following page of the Segal website: http://www.segalco.com/publications/surveysandstudies/winter2013zonestatus2012.pdf
The key survey findings follow:
- Between 2011 and 2012, the percentage of plans in the green zone decreased slightly to 60 percent. In contrast, the percentages of yellow-zone and red-zone plans increased slightly over that period to 14 percent and 26 percent, respectively.
- The average Pension Protection Act of 2006 (PPA’06) funded percentage for the surveyed plans was 84 percent in 2012, which represents a slight decrease from 2011.
As noted in the report, the survey data is based on our certifications through November for clients that have plan years beginning January 1 through September 1. The survey does not include about 40 plans that have plan years beginning October 1 to December 1 because information on their certifications was not available when the survey was compiled.
As soon as those zone certifications are completed (Spring, 2013), a graph summarizing the 2012 zone status for plans with plan years beginning January 1 through December 1 will be posted on the Segal website for client relationship managers (CRMs) to share with clients, but a new survey report will not be published at that time.
The latest survey results continue a pattern of fewer green-zone plans and a lower average PPA’06 funded percentage, findings that were reported in our Spring 2012 Survey of Calendar-Year Plans’ 2012 Zone Status, which surveyed the 2012 zone status of about 230 plans with January 1 start dates. That survey (http://www.segalco.com/publications/surveysandstudies/spring2012zonestatus2012.pdf) found that 62 percent of plans were in the green zone; 11 percent of plans were in the yellow zone; 27 percent of plans were in the red zone; and the average PPA’06 funded percentage was 86 percent.
Survey results indicate that plans are still facing formidable funding challenges, even though investment performance improved in the second half of 2012. Regardless of current or anticipated zone status, it remains important for trustees to understand their plans’ vulnerability to investment, employment and longevity risks. Segal suggests that trustees should consider utilizing stochastic and deterministic asset-liability modeling (ALM), as well as strategies to mitigate these risks, including alternatives to the current defined benefit plan design.
For more information, or to speak with an expert, please contact Mary Feldman.
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The Segal Company (www.segalco.com) is an independent, US-based firm of benefit, compensation and human resources consultants. Clients include joint boards of trustees administering pension and health and welfare plans under the Taft-Hartley Act, corporations, non-profit organizations, professional service firms and state and local governments.