PBGC’s SFA Program Boosts Multiemployer Funded Level to 97%

Without the $16 billion in special financial assistance from the Pension Benefit Guaranty Corporation, the plans’ funded level would have ended 2024 stagnant, per Milliman study.

U.S. multiemployer plans’ funded levels surged to 97% in 2024 from 89% in 2023, according to a study from consulting firm Milliman. Without $16 billion in Pension Benefit Guaranty Corporation funding, the nearly 1,200 plans’ aggregate funded level would have ended the year stagnant.

The government support was made possible by the PBGC’s Special Financial Assistance Program, created by the American Rescue Plan Act of 2021. While the $16 billion was the difference between no gain and an eight-percentage-point bump in funded levels, Milliman attributed the rise primarily to investment gains.

“Strong returns during the first and third quarters of 2024 largely drove the year’s significant rise in the aggregate funded percentage, which reached the second-highest point since Milliman launched this study in 2007,” Tim Connor, co-author of the study, said in a statement. “We now see more than half of all plans funded 100% or better as they continue their trend of upward improvement in funded percentage.”

Milliman’s study was based on the accrued liabilities and discount rate reported by the plans on their most recent Form 5500 filings, which, according to the firm, were determined by the plans’ actuaries at least two years earlier. Despite some asset losses in the final quarter of 2024, the aggregate funded percentage has increased by 44 percentage points since the first quarter of 2008, Milliman found.

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According to the study, 53% of the 1,193 plans had funded levels of at least 100% at the end of 2024, up from 37% one year earlier, while 84% have a funded level of at least 80%. Among the struggling plans, 85 plans (7%) have funded levels less than 60% “and may be headed toward insolvency,” the study stated. “Many of these plans are likely eligible for SFA and expected to apply for it in 2025.”

The study reported that most of the 97 plans receiving financial assistance were either on the verge of insolvency or were expected to become insolvent in the near term, but are now expected to see their funded statuses improve “substantially” after receiving special financial assistance. However, according to Milliman, the full effect of the assistance will only be revealed over time, as eligible plans have until the end of the year to apply for funding.

The Special Financial Assistance Program grants funding to underfunded and distressed multiemployer pension funds nearing insolvency.

Pension funds that receive special financial assistance must monitor the interest resulting from the grant money as separate from other sources of funding. The PBGC requires that at least two-thirds of the assets be invested in “high-quality fixed-income investments.” Remaining assets, up to one-third of those granted, may be invested in return-seeking assets such as stocks and stock funds.