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The Central States, Southeast and Southwest Areas Pension Plan’s withdrawal liability valuation (which establishes the basis for withdrawal liability assessments during the January 1, 2016 through December 31, 2016 period) as of December 31, 2015 prepared by Segal Consulting reports that the total level of the Fund’s unfunded vested liability (the amount that the Fund is “in the red”) is $29.2 billion, an increase of $4.8 billion from 2014.

This approximately $5 billion increase in the Fund’s level of unfunded vested benefits is more than twice the size of prior years’ increases.

The Segal Report attributes this substantial increase to a number of factors, the most important of which are:

1.         The Fund lowered it assumed net rate of return on investments from 7.5% (which it had used for years) to 6.25%;

2.         The Fund’s rate of return on its investments for 2015 was lower than was projected.

Central States also updated the mortality tables used by the Fund to calculate the life expectancy of people receiving benefits.

Two important notes:  (1) the Fund’s level of unfunded vested benefits was calculated prior to reduction for the value of outstanding claims for withdrawal liability that can reasonably be expected to be collected; and (2) the Fund’s level of unfunded vested liability for the Fund’s “New Employer Pool” was zero, meaning that the Fund lists the New Employer Pool as being fully funded.

A copy of the Segal report can be found here.