Composite Pension Plan Comparative Performance Study Released
A new study released today finds that composite retirement plans would have fared better during the coronavirus pandemic and related market declines than traditional defined-benefit multiemployer plans, allowing participants to receive higher benefits and attracting more employer participants. The study makes it clear that employees and employers stand to benefit once Congress authorizes the use of composite plans.
SWACCA, in partnership with the Associated General Contractors and the employer groups participating in the Construction Employers of America coalition, sponsored the study to evaluate how the composite plans would have performed during two recent economic crises, the downturn of 2008 and the more immediate coronavirus pandemic. Composite plans are a retirement reform designed to provide benefit security through conservative funding principles and early corrective action.
“Composite plans are a voluntary approach with built-in guardrails to keep plans on track that would give plan sponsors a much-needed option as they look for ways to provide sustainable lifetime income to participants,” concluded the study’s author, Josh Shapiro with the Groom Law Group. “Our case study illustrates how the key composite plan features can provide greater long-term benefit security than current pension plans.”
The study found that while the typical multi-employer retirement plan would have suffered significant financial setbacks that will likely require a 15 percent cut in benefit payments, composite plans would have performed more successfully. Composite plan participants would, at worst, experience a brief 5 percent reduction in benefits before the average plan returns to solvency.
Josh Shapiro is Senior Actuarial Advisor with the Groom Law Group in Washington, D.C. Mr. Shapiro serves on the Board of Directors of the American Academy of Actuaries and chairs its Pension Practice Council. He was previously the Deputy Director for Research and Education at the National Coordinating Committee for Multiemployer Plans (NCCMP).
SWACCA is forcefully advocating for Congress to authorize composite plans via the GROW Act. SWACCA helped to get the GROW Act included in the Houses of Representatives’ most recent coronavirus response legislation and is currently focused on getting the Senate to include the GROW Act in its next coronavirus relief package.
A full copy of the Composite Plan study can be downloaded here.
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