EXCLUSIVE: Despite the pandemic, WGA’s $3.65 billion pension plan is in “good shape” and has been better funded in each of the last three years, according to the plan’s most recent funding release, noting that it is doing well with its The financing level of 88.8% is well within the limits of what is known as the “green zone”. Plans in the Green Zone, which is the highest tier of funding, have a funded ratio—that is, assets divided by liabilities—over 80%.
“We are pleased to announce that the 2021 retirement plan has retained its green zone status and expects to remain in the green zone for the foreseeable future,” the release reads. “By adhering to the discipline of long-term investment criteria, the pension plan has delivered an average annual return of approximately 10% over the past 30 years through the end of 2021. The directors are closely monitoring the financial markets and have taken the necessary steps to protect the long-term viability of the pension plan.”
In 2019, the plan had assets of $3.22 billion and liabilities of $3.75 billion with a funding percentage of 85.7%. In 2020, it had assets of $3.41 billion and liabilities of $3.95 billion, accounting for 86.2% funding share. In 2021, it had assets of $3.65 billion and liabilities of $4.11 billion, accounting for an 88.8% funding percentage. In other words, assets have grown faster than liabilities for each of the last three years.
As of January 1, 2021, the plan had 19,400 participants and beneficiaries, of whom 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 are entitled to future benefits.
“Since 2010, the directors have taken additional actions to help improve the financial condition of the pension plan,” the statement said. “One of the reasons the plan is in such good shape today compared to some of its competitors is that while benefits continue to be credited at the current contribution rate of 48.3% up to 6.0% of pay, directors are out of an abundance of caution, amended the pension plan to provide that any contributions from contributing employers in excess of 6.0% of compensation are not used to accrue additional benefit accruals, but instead are used to ensure the pension plan’s liquidity .
“This change was made in anticipation of the subsequent amendment to the Minimum Base Agreement which 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% on May 2, 2022. Put simply, all contributions above 6% are used to promote the financial health of the plan.”
Pension plans, the release states, “are designed to pay benefits over a very long period of time and we have a long-term investment strategy that has enabled the pension plan to use the time to weather difficult financial circumstances. Fluctuations in financial markets are a given… The Directors continue to manage the pension plan prudently, taking into account both past history and discernible future trends. Annuity payments from the pension plan are made as promised, and money is properly set aside to adequately provide for future retirement benefits. The Board of Directors is continuing its successful investment philosophy: invest sensibly in the long term; Monitor investment performance and market conditions and act prudently with professional advice.”
The plan says it currently invests 40% of its asset allocations in equities; 20.8% in investment grade debt; 8.8% in real estate, 5.7% in high yield debt; and 24.7% in “other” investments.