While the majority of collectively bargained multiemployer pension plans are said to be in sound financial condition, a closer look at the numbers by one pension consultant reveals that a disproportionate number of participants face an uncertain future.

Read: Moody's warns multiemployer pension sponsors of credit implications

Segal Consulting, an advisory to multiemployer plans, reviewed 384 of its clients’ filings for the year ending in September 2015.

While 64 percent were deemed to be in “Green Zone” status, meaning they have a funded status of at least 80 percent, nearly one half of participants are in “Red Zone” plans, which are funded at less than 65 percent.

Read: PBGC: Multiemployer program apocalypse delayed 3 years

Even more disconcerting is that half of the participants in red zone plans are also in plans deemed to be in “critical and declining” status, the new designation for the worst funded plans created in the Multiemployer Pension Reform Act of 2014.

Plans are deemed to be in critical and declining status if they are expected to be insolvent in 15 years.

Of the 102 plans that Segal reviewed which are in the red zone, 34 have been designated as being in critical and declining status.

All told, Segal’s survey looked at plans covering 3.8 million total participants, or nearly 40 percent of the approximately 10 million participants in all multiemployer plans, according to the Pension Benefit Guaranty Corp.

The 102 plans in red zone status represent 26 percent of the plans Segal examined, or 49 percent of participants.

About 9 percent, or 34 of those plans are in critical and declining status, representing about 857,000 participants, or 23 percent of the plans Segal looked at.

The MPRA of 2014 gave trustees of plans in critical and declining status new powers to reduce participants’ and retirees’ promised benefits in order to avoid insolvency.

Trustees will be able to reduce participants’ benefits to 110 percent of the benefits guaranteed by the PBGC, but those reductions will have to be approved by the Department of Treasury.

PBGC’s highest guaranty is about $13,000 annually. If a participant’s monthly guaranty is $1,000 a month, trustees would not be able to cut promised monthly benefits below $1,100 under the new law. Retirees 80 and older and workers on disability would be exempted from the cuts.

PBGC projects that about one million of the 10 million participants in multiemployer plans insured by the agency are in plans that are expected to be insolvent.

Similar to other analysis, Segal found that red zone plans tend to have a much higher percentage of inactive participants than healthier plans.

On average, 92 percent of participants in red zone plans are inactive—meaning only 8 percent of participants are actively contributing to the plans’ funding.

Green zone plans have an average of 72 percent of inactive participants.

Multiemployer plans in the transportation industry stand to suffer the most, as 55 percent of the plans in that sector are in red zone status, according to Segal.

Instant Insights /

Half of multiemployer pension participants in red zone plans

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