A new report details the stresses to which multiemployer defined benefit pension plans(MEPPs) are subject, and analyzes how much effect eachdifferent type has on plans that are healthy and plans that mightnot be so healthy.

The Society of Actuaries released its report “Multiemployer PlanStress Metrics,” which looks at data it says are two keymetrics:

• Previous Benefit Cost (PBC)

• Previous Benefit Cost Factor (PBCF)

PBC “measures the annualized cost per current active participantto pay off a plan’s unfunded liability,” the report said, addingthat it is “calculated by dividing a plan’s unfunded liabilityamortized over 15 years by the number of active participants in theplan.”

PBCF, which completes the picture, “fills the gaps left by thePBC. It compares the annual cost of paying off unfunded liabilitiesto the cost of funding the current year’s benefit accruals.”

Financial stress on the system ofMEPPs, said the report, affects approximately 10million participants and 200,000 contributing employers, and is notjust a concern to them but to society as a whole.

And regardless of how MEPP assets and liabilities are measured,it said, “[t]he aggregate level of underfunding in the system issignificant...”

Among other results, the report found that stable plans “interms of financial stress posed by unfunded liabilities” gainedadditional stability between 2009 and 2013, and looked as if theywere well positioned to satisfy their obligations over the longterm.

However, financially stressed plans, perhapspredictably, went the other way; the report said that this was“likely a result of decreasing numbers of active participants asmanufacturing jobs and unions both experience declines.”

In fact, plans with the highest stress levels are suffering mostas their stress levels increase, while plans with the lowest stresslevels are improving.

The great majority of multiemployer pension plan participants,the study said, are in plans that have higher annualized costs ofpreviously accrued benefits than the costs of current benefitaccruals and administrative expenses taken together.

And, looking at that period of 2009–2013 again, “[t]heannualized costs of previously accrued benefits make up well overhalf of annualized plan costs.”

Both PBC and PBCF plans, it said, are sensitive to the return oninvestment.

The lower costs associated with high returns are a result theyhope for, but should returns be low, plans—particularly those thatare already stressed—could find themselves hard pressed to copewith the results.