A review of 124 multiemployer pension plans by Moody’s shows they were collectively underfunded by $337 billion at the end of 2014.

Related: Borrowing to fund pensions

Together, the plans’ funding level is 47 percent, according to the ratings agency, which said it expects the funding levels to have potentially worsened significantly since 2014, in light of “anemic” stock market and fixed income returns in 2015.

Between 2008 and 2014, the collective obligations of the 124 plans increased by $262 billion, from $377 billion to $639 billion. During the same period, plan assets increased by only $90 billion, according to Moody’s.

The 2008 financial crisis wiped out $80 billion, or one quarter of the plans’ collective assets. From that point on, the “writing was on the wall” regarding the struggle for many multiemployer plans to meet future pension obligations.

“When a plan is only 50 percent funded, assets must work twice as hard to keep up with obligations,” write Moody’s analysts in a research report dated July 13. “Plan assets just couldn’t keep up by solely relying on market returns.”

During the six-year period tracked by Moody’s, the discount rates used to project future obligations fell by 145 basis points.

But sponsor contributions did not increase accordingly, the report shows. In 2015, the 124 multiemployer plan sponsors collectively contributed $15 billion, which was “virtually unchanged” from 2013.

Moody’s report compares the discrepancy in risk management approaches between multi-employer and single employer pension sponsors.

As many single-employer pension sponsors have taken an active de-risking approach to managing pension obligations since 2008, multiemployer plans have had to rely on riskier assets to maximize returns.

At the end of 2014, the 124 multi-employer plans held 80 percent of assets in “riskier” categories, compared to 60 percent of assets in more volatile investments in single-employer plans.

About 46 percent of multiemployer assets were invested in equities at the end of 2014, compared to about 36 percent in single-employer plans. Single-employer plans had nearly twice the investment in fixed-income investments than multiemployer plans, which collectively held about 22 percent of assets in fixed income.

Of the 124 multiemployer plans reviewed by Moody’s, 51 had funded ratios below 50 percent.

Four multiemployer pensions had a funding level less than 30 percent at the end of 2014: the Food Employees Labor Relations Association and United Food and Commercial Workers pension plan at 22.3 percent; the Carpenters Pension Trust Fund — Detroit and vicinity at 24.4 percent; the Trucking Employees of North Jersey Welfare Fund pension at 25.3 percent; and the New York State Teamsters Conference Pension and Retirement fund at 29.8 percent.

Among the plans reviewed by Moody’s, 11 had funding levels above 70 percent.

The three best funded multiemployer pensions at the end of 2014 were the Seafarers Pension Trust funded at 120.2 percent; the New England Carpenters Guaranteed Annuity Fund at 110.1 percent; and the Steamship Trade Association of Baltimore at 94.4 percent.

Instant Insights /

For many multiemployer pension plans, the writing is on the wall

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