PBC and PBCR: Two Stress Metrics for U.S. Multiemployer Pension Plans
Previous Benefit Cost (PBC) and Previous Benefit Cost Ratio (PBCR) are metrics developed by the SOA for measuring the financial stress imposed on multiemployer pension plans (MEPPs) by the combination of unfunded liabilities and declining numbers of active participants.
Highlights from the most recent update:
- The annualized per-active-participant cost of reducing unfunded liabilities generally increased from 2015 to 2016. When computing PBCs with funding discount rates, in 2016, 8% of plans covering 8% of MEPP participants had PBCs of $20,000 or greater, up from 6% of plans covering 7% of participants in 2015. And the percentage of plans with PBCs of $2,000 or less decreased from 40% of plans covering 46% of MEPP participants in 2015 to 34% of plans covering 33% of participants in 2016.
- From 2015 to 2016, the portion of total pension costs attributable to reducing unfunded liabilities increased. When computed with funding discount rates, the plan-weighted median PBCR increased from 49% in 2015 to 55% in 2016.
- Over half of MEPP participants were in plans for which the cost of reducing unfunded liabilities exceeded the cost of benefits earned by active participants, and the percentage of such participants increased from 2015 to 2016. The participant-weighted median PBCR increased from 54% in 2015 to 58% in 2016.
Research Insights – U.S. Multiemployer Pension Updates
The authors thank the following volunteers for their thoughtful arm’s-length review of the most recent study update prior to publication. Any opinions expressed may not reflect their opinions or those of their employers. Any errors belong to the authors alone.
Christian E. Benjaminson, FSA, EA, FCA, MAAA
James B. Dexter, FSA, EA, FCA, MAAA
Tammy F. Dixon, FSA, EA, FCA, MAAA
Paul B. Dunlap, FSA, EA, FCA, MAAA
James A. Nolan, FSA, EA, MAAA
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