If you are a participant in a union multiemployer pension plan or a state or local government pension, the retirement planning news out Monday isn't great.
Some 37 percent of the officers of the country's largest multiemployer plans said in a survey released by Pyramis Global Advisors, which manages one-third of all assets in these plans, that they didn't believe the existing plans will survive. The main reasons they believe this are:
- Company sponsors lack commitment: 36 percent.
- Legislative requirements endanger the plans: 32 percent.
Other factors cited that put these large plans at risk include declining union membership, increasing benefit payments and the demise of some large-company sponsors.
Another study released Monday morning by the Center for Retirement Research at Boston College and the Center for State & Local Government Excellence determined that the funded status of state and local pensions declined in 2012 to 73 percent from 75 percent. At the same time, the annual required contributions that participating governments must make rose, but these entities made just 80 percent of these required payments.
Millions of workers and retirees are covered by these two kinds of retirement plans, and there is a strong and obvious need to put them on solid financial footing. Everybody is looking for a solution. The report on state and local pensions said the situation will likely improve if the stock market continues to be robust. The union pension managers told Pyramis they are willing to consider alternative investments including property, hedge funds and private equity to shore up shortfalls and manage volatility.
Neither of these ideas look like a slam-dunk.
If you depend on one of these pensions -- or hope you'll be able to do so one day -- how do you feel about these reports?