EXCLUSIVE: Despite the pandemic, the WGA’s $3.65 billion Pension Plan is in “good shape” and has gotten better funded in each of the last three years, according to the Plan’s latest funding notice, which notes that its funding level of 88.8% puts it well within the so-called “Green Zone.” Plans in the Green Zone, which is the highest level of funding, have a funded percentage – which are assets divided by liabilities – higher than 80%.
“We are pleased to report that for 2021 the Pension Plan maintained its Green Zone status and is projected to stay in the Green Zone into the foreseeable future,” the notice states. “By following the discipline of long-term investment criteria, over the last 30 years through the end of 2021, the Pension Plan has realized an average annual rate of return of approximately 10%. The Directors are closely following the financial markets and have taken steps as needed, with an eye toward protecting the long-term viability of the Pension Plan.”
In 2019, the Plan had $3.22 billion in assets and $3.75 billion in liabilities, with a funded percentage of 85.7%. In 2020, it had $3.41 billion in assets and $3.95 billion in liabilities, for a funded percentage of 86.2%. In 2021, it had $3.65 billion in assets and $4.11 billion in liabilities, for a funded percentage of 88.8%. In other words, assets have been growing faster than liabilities in each of the last three years.
As of January 1, 2021, the Plan had 19,400 participants and beneficiaries, of which 9,338 were current employees; 5,518 were retired and receiving benefits, and 4,544 were retired or no longer working for the employer and have a right to future benefits.
“Since 2010, the Directors took additional action to help improve the financial condition of the Pension Plan,” the notice says. “One of the reasons the Plan is in such good shape today compared to some of its peers is that while benefits continue to be credited at the current 48.3% rate of contributions up to 6.0% of compensation, the Directors, out of an abundance of caution, amended the Pension Plan to provide that any contributions made by contributing employers in excess of 6.0% of compensation would not be used to provide additional benefit accruals, but rather would be used to ensure the liquidity of the Pension Plan.
“This change was made in anticipation of the subsequent Minimum Basic Agreement amendment that increased the required contribution rate to the Pension Plan from 6% to 7.5% of compensation effective May 2, 2011; to 7.75% of compensation on May 2, 2012; to 8% of compensation on May 2, 2013, to 8.5% on May 2, 2014; to 10% of compensation on January 1, 2021; to 10.5% on May 2, 2021, and to 11.5% as of May 2, 2022. In simplest terms, all contributions in excess of 6% are being used to promote the Plan’s financial health.”
Pension plans, the notice says, “are designed to pay out benefits over a very long time, and we have a long-term investment strategy that has allowed the Pension Plan to take advantage of time to ride out difficult financial circumstances. Financial market fluctuations are a given…The Directors continue to prudently manage the Pension Plan, taking into account past history as well as discernable future trends. Pension payments are being made from the Pension Plan as promised, and money is being properly set aside to adequately provide for future pension benefits. The Board of Directors is continuing its successful investment philosophy: invest appropriately for the long term; monitor investment results and market conditions, and act prudently using professional advice.”
The Plan says it currently has 40% of its asset allocations in stocks; 20.8% in investment grade debt instruments; 8.8% in real estate, 5.7% in high-yield debt instruments; and 24.7% in “other” investments.
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