Articles | August 8, 2023
This Q3 2023 multiemployer pension plan news recap covers:
Source: Segal’s 2023 Survey of Plans’ Zone Status
The percentage of plans in the green zone in our survey is 73 percent, down from 77 percent in 2022, but still up from 72 percent in 2021. Due to recent market fluctuations, the average market-value funded percentage has decreased 15 percent from last year, while the average PPA’06 funded percentage stayed level from last year, due to asset smoothing.
Get an infographic of survey data.
The American Rescue Plan Act of 2021 created the SFA program administered by PBGC. As of June 30, 2023, almost $42 billion of SFA has been paid to eligible multiemployer plans. In addition, approximately $50 billion more is projected.
In this environment and with that many dollars, greater scrutiny is inevitable. In March 2023, the PBGC Office of Inspector General (OIG) published Report No. EVAL-2023-05 regarding their review of applications and payouts to date. That report recommended stronger initial reviews and a greater focus on ensuring deaths are not included in SFA requests. The SFA application process has subsequently been modified for plans to submit terminated vested participants to the PBGC for them to do an independent death audit prior to submission of a completed SFA application. You can access the full report here.
The current shortage of construction workers could be met by women if the industry rises to meet the challenges of recruiting and retaining this important segment of the population. The results of a recent building trades member survey indicate that almost three-quarters of respondents consider the biggest obstacle in recruiting women to be the lack of awareness of opportunities within the trades. Other impediments were insufficient access to childcare, underrepresentation and the lack of apprenticeship programs.
There are opportunities to address the shortage of construction workers. Hiring more women may be the key. However, education on the advantages of working in the industry, assistance with childcare and specific training programs are needed.
Our insight provides greater detail for consideration.
Approaches to managing SFA assets received by eligible plans have varied among those plans depending on several characteristics, including:
A recent Segal webinar discussed implications of SFA for both short and long-term solvency of plans, as well as the types of investment strategies that can work best in mature plans with significant cash outflow.
Some plans that have received SFA money are using a cash-flow-matching strategy. With fixed income yields higher than they have been in several years, this strategy allows a plan to lock in high rates and pay benefits for a set number of years, thus reducing the volatility of potential outcomes.
Given the importance of SFA assets to prolonging the life of the plan and thus paying beneficiaries the promised benefits, low risk and safe approaches should be considered. Secondarily, this is an approach that may be beneficial to non-SFA plans.
Listen to the webinar recording.
Both DB and DC retirement plans currently face an array of challenges as they integrate ESG considerations into their investment approaches. A major hurdle still faced by all ESG investors is inconsistent measures and definitions, something that opens the door for so-called “greenwashing”: making misleading claims of ESG success.
Initiatives have been proposed by states and at the federal level. Often these have been contradictory. Notwithstanding the challenges, institutional investors are integrating ESG considerations pragmatically as the global economy and risk environment changes.
For more information on ESG considerations, read a Benefits Magazine article by Maureen O’Brien and Julian Regan, Senior Vice Presidents at Segal Marco Advisors.
This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.