SMITHFIELD – More than one-third of Taft-Hartley pension plan leaders nationwide believe the current pension system is unsustainable and will succumb to various pressures, reported Pyramis Global Advisors, a Fidelity Investments company.
In a survey of 102 executive directors and other top officers — who manage more than $150 billion in total assets and represent 2.3 million employees and retirees — 37 percent of respondents said they think the current multi-employer system, featuring collective bargaining deals struck by companies and unions, will not survive.
In the wake of the financial downturn, among the pressures cited as threatening the stability of the pension system are investment market volatility, falling unionization rates, low investment rates and legislative challenges.
Concerns about the system’s viability were most common from managers who have “yellow zone” plans, or those considered endangered. Fifty-three percent of that group said they considered the system unsustainable.
Respondents were more optimistic about their individual plans, with 55 percent describing their own pension plans as “financially strong.” But 60 percent said they are considering major changes, like raising the retirement age, to address structural issues.
They also offered a variety of visions for the future of the pension system. Some suggested that the system in 10 years might provide different benefits to active workers and retirees, or that it might entail more shared investment risks.
In response to uncertainty about the future, many officers said they are exploring alternative types of investment risk. More than half of respondents said they plan to diversify into asset classes like hedge funds, private equity and property.
And nearly three-quarters said they will consider seeking outside advice or assistance on investment decision-making, given limited internal capabilities to keep track of the fast-moving global markets.
“Our survey reflects many of the concerns Taft-Hartley plans have about the sustainability of the multi-employer model,” Mike Jones, Pyramis president and CEO, said in a statement. “Over the long term, however, respondents tell us they see a future of different models with changes in the responsibilities of different parties involved in the process.”