l 

I 

Treas. 

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7105.35 

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P4 

c.2 

Study of Pension Plan Terminations, 1974 

Department. of the Treasury 

Department of Labor 

May 1976 
. ..... - u.. =--- .. 

UBRARY1 ~()OM 5030 

t I ti • :~ J. lq] 

TREASURY DEPARTME T 

Insert for Study of Pension Plan Terminations, 1974 

Department of the Treasury 

Department of Labor 

May 1976 
Part 

I. Introduction 

Contents 

~ 

1 

II. Highlights ........•...............•...• ·.....•... 3 

III. Number of Terminations and Claimants and 

Extent of Benefit Losses ...........•.....•...... 5 

IV. Characteristics of Terminated Plans ..•...•.•.•.. 19 

V. Characteristics of Employers of Terminated 

Plans.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 

VI. Terminated Multi-employer Plans, 1965-1973 ...... 47 

Appendix A. Brief EYplanation of Termination 

Insurance Under ERISA .. . ..... . . . . ............. 59 

Appendix B. Data Correction in the Treasury 1972 

;:.o Study ............................ · · . · · · · · · · · · · · · v 
Tables 

Table No. 

III - 1 Comparison of 1974 and 1972 Treasury Department 

studies of Pension Plan Terminations................. 6 

III - 2 Number of Persons in Terminated Pension Plans by 

Category of Claimant, 1974 •.....•....•.....•......••• 10 

III - 3 Present Value of Accrued Benefits and Amounts 

Distributed for Claimants with Losses, 1974 •...•...•• 12 

III - 4 Claimants with Losses in Terminated Pension Plans 

Superseded or not Superseded by New Plans, 1974 •••••• 15 

III - 5 Present Value of Benefits Lost by Claimant Category, 

IV - 1 

IV - 2 

IV - 3 

IV - 4 

IV - 5 

IV - 6 

IV - 7 

v - 1 

v - 2 

v - 3 

1974................................................. 17 

Distribution of Claimants by Age of Terminated Plan, 

1974................................................. 21 

Claimants with Losses by Claimant Category and Age 

of Plan, 1974........................................ 22 

Distribution of Benefit Losses by Age of Plan, 1974 •• 24 

Distribution of Claimants by Size -- Number of Claimants -- of Terminated Plan, 1974 •.•.••......•.....•.• 26 

Distribution of Claimants by Medium of Funding, 1974. 29 

Changes in Plan Participation Prior to Termination, 

1974................................................. 33 

Distribution of Claimants by Reason for Termination, 

19 74 ...........•....••....•...............•.•....••. 35 

Terminated Plans by Industry of Employer, 1974 ....•• 38 

Relationship of Employer Inc-ome and Net Worth to Accrued 

Benefits and Amounts Distributed in Terminated Pension 

Plans, 1974.......................................... 40 

Plans with Losses: Relationship of Employer Income to 

Claimant Losses in 410 Plans for which Employer Income 

Data were Available, 1974 .............•.............• 42 
Table No. 

v - 4 Plans with Losses: Relationship of Employer Net Page 

v - 5 

VI - 1 

VI - 2 

VI - 3 

Worth to Claimant Losses in 401 Plans for which 

Employer Net Worth Data were Available, 1974 ••.•••••. 44 

Plans with Loans to Employer or Investments in 

Employer Stock in 1,094 Terminated Plans Reporting 

Loan and Investment Data, 1974 •...................••• 46 

Selected Characteristics of Terminated Jointly Administered Multiemployer Pension Plans under Collective 

Bargaining, 1965-1973 •......•..•.•..•..•..•.•.•..••.• 55 

Distribution of All Jointly Administered Multiemployer 

Pension Plans under Collective Bargaining, 1971 and 

Terminated Plans, 1965-1973, by Number of Participants, 

Industry and Medium of Funding •.......•.•.......•..•• 57 

Number of Persons Losing Benefits, and Extent of Losses 

in Terminated Multiemployer Pension Plans with Losses, 

by Category of Claimant, 1965-1973 ................•... 58 

\ 
\ 

The report on single-employer plan terminations in 1974 was 

prepared by the Office of Tax Analysis, Treasury Department. The 

report on multi-employer pension plan terminations, 1965-1973, was 

prepared by the Pension and Welfare Benefit Administration, Labor 

Department. The Statistics Division, Internal Revenue Service, 

conducted the Treasury survey and processed the survey data. 

Many individuals contributed importantly to the preparation of 

the Treasury-Labor studies. Major contributions were made by 

Janet Barnhardt, Michael Bland, David Chapman, Paul Grayson 

and Karen Lipkind, all of the Internal Revenue Service, by 

Linden Smith of the Treasury Department and by Vincent Cicconi 

and Roger Comer of the Labor Department. In addition, the many 

pension plan specialists in the IRS District Offices provided 

the basic survey data and information in the Treasury study. 
Contents 

Part ~ 

I. Introduction .................................. . 

II. Highlights ..................................... . 

III. Number of Terminations and Claimants and 

Extent of Benefit Losses ....................... . 

IV. Characteristics of Terminated Plans ............ . 

V. Characteristics of Employers of Terminated 

Plans .............•............................. 

VI. Terminated Multi-employer Plans, 1965-1973 ..... . 

Appendix A. Brief EYplanation of Termination 

Insurance Under ERISA .. . ..... . . . ..... ·· · · · · · ·· 

Appendix B. Data Correction in the Treasury 1972 

Study ................................ ··········· 
Tables 

Table No. Page 

III - 1 Comparison of 1974 and 1972 Treasury Department 

studies of Pension Plan Terminations ••.••.....•...••• 

III - 2 Number of Persons in Terminated Pension Plans by 

Category of Claimant, 1974 •...•.•.......•....•.•..••. 

III - 3 Present Value of Accrued Benefits and Amounts 

Distributed for Claimants with Losses, 1974 ...••...•• 

III - 4 Claimants with Losses in Terminated Pension Plans 

Superseded or not Superseded by New Plans, 1974 .•.••• 

III - 5 Present Value of B'enefits Lost by Claimant Category, 

IV - 1 

IV - 2 

IV - 3 

IV - 4 

IV - 5 

IV - 6 

IV - 7 

v - 1 

v - 2 

v - 3 

19 74 . ............................................... . 

Distribution of Claimants by Age of Terminated Plan, 

19 74 . ............................................... . 

Claimants with Losses by Claimant Category and Age 

of Plan, 1974 ....................................... . 

Distribution of Benefit Losses by Age of Plan, 1974 .• 

Distribution of Claimants by Size -- Number of Claimants -- of Terminated Plan, 1974 •.•.•.......••....•.• 

Distribution of Claimants by Medium of Funding, 1974. 

Changes in Plan Participation Prior to Termination, 

19 7 4 . ............................................... . 

Distribution of Claimants by Reason for Termination, 

1974 ................. ~ ............................. . 

Terminated Plans by Industry of Employer, 1974 ..... . 

Relationship of Employer Income and Net Worth to Accrued 

Benefits and Amounts Distributed in Terminated Pension 

Plans, 1974 ....................•..•...............•.. 

Plans with Losses: Relationship of Employer Income to 

Claimant Losses in 410 Plans for which Employer Income 

Data were Available, 1974 •....•.......•......••...••• 

. ......................................................... ilii .... iiii ..... 
Table No. 

v - 4 Plans with Losses: Relationship of Employer Net 

Worth to Claimant Losses in 401 Plans for which 

Employer Net Worth Data were Available, 1974 •.••••••• 

Page 

v - 5 

VI - 1 

VI - 2 

VI - 3 

Plans with Loans to Employer or Investments in 

Employer Stock in 1,094 Terminated Plans Reporting 

Loan and Investment Data, 1974 •...•.............•.•.• 

Selected Characteristics of Terminated Jointly Administered Multiemployer Pension Plans under Collective 

Bargaining, 1965 -1973 •......•..•..•••..•..•.•.••..••• 

Distribution of All Jointly Administered Multiemployer 

Pension Plans under Collective Bargaining, 1971 and 

Terminated Plans, 1965-1973, by Number of Participants, 

Industry and Medium of Funding •.•..•............•..•• 

Number of Persons Losing Benefits, and Extent of Losses 

in Terminated Multiemployer Pension Plans with Losses, 

by Category of Claimant, 1965-1973 •••...•........••... 
Introduction 

The Treasury and Labor studies of plan terminations reported 

here are a follow-up of earlier studies~ The priginal Treasury 

study covered pension plan terminations reported to the Internal 

Revenue Service during 1972. Although appropriate for singleemployer plans, the one-year Treasury study was not expected to 

yield sufficient data on multi-employer plan terminations because 

few multi-employer plans terminate in any given year. Accordingly, 

the Labor Department undertook a study of multi-employer plan 

terminations reported to that Department for the years 1965 through 

1971. The findings from these studies were presented in a joint 

Treasury-Labor publication, Study of Pension Plan Terminations, 

1972 issued in August 1973. The studies measured the extent and 

character of benefit losses among participants in terminating plans 

and the findings were useful in the preparation of pension legislation. 

The second round of Treasury-Labor studies, the findings of 

which are presented in this report, was planned during the 

legislative deliberations on pension reform. The second Treasury 

study covered pension plan terminations in 19741/ and used the 

methodology of the 1972 Treasury study. The second Labor study of 

multi-employer plans extends the original study period (1965-1971) 

through 1973. 

During the time interval in which the second studies were 

underway, Congress enacted major pension reform in the Employee 

Retirement Income Security Act (ERISA). Concern about losses 

ll More specifically the study covers plans reporting terminations to 

the Internal Revenue Service during the 12 months ending August 1974; 

of the 1,314 terminations covered, all but 38 were for singleemployer plans. 
- 2 -

attributable to insufficient assets on plan terminations, . as 

indicated by the 1972 study results, led to inclusion in ERISA of 

(1) minimum funding standards to improve sufficiency of assets 

and reduce the risks of benefit losses and (2) termination 

insurance to protect against benefit losses in the event of plan 

terminations for covered defined benefit plans. 

Under ERISA, the Pension Benefit Guaranty Corporation was 

established as the government insurer financed by premiums paid 

by covered plans. To date, PBGC has had less than two years experience. Detailed information on the losses and characteristics of 

terminated plans processed by PBGC, and participants and their 

employers are not yet available. In the absence. of such data, 

the current Treasury-Labor study results are useful, even though 

the reported terminations in the study preceded the establishment 

of termination insurance. 

The methodologies and basic concepts in this 1974 report were 

the same as those in the 1972 report. A detailed discussion of the 

methodologies, concepts, survey forms, etc. is presented in the 1972 

report and is not repeated here. 

Part II of this report presents some highlights from the studies. 

Parts III, IV and V present the detailed results of the 1974 Treasury 

1/ study.- Part VI presents the detailed results of the Labor study. 

Appendix A provides a brief explanation of the termination insurance 

program under ERISA. Appendix B provides revised Tables 4-6 and 5-4 

for the Treasury study in the 1972 report. 

ll In some tables, data have been combined or not provided to preclude 

unauthorized disclosure. 
- 3 -

II 

Highlights 

Si ngle-employer plans (Treasury study) 

1,314 single employer deferred benefit pension plan terminations 

(with 40,500 claimants (current participants,vested former employees 

and retirees) were reported during 1974. 

20,700 claimants in 711 plans had no losses because the plans had 

sufficient assets to cover all accrued benefits. 

596 plans had insufficient assets at termination and 16,500 out 

of 19,400 claimants in those plans lost benefits. 

Even though more plans terminated with losses in 1974 than in 

1972, (596 compared with 546) there were fewer claimants in plans 

with losses in 1974 and lower losses per claimant. 

The average loss per claimant with loss was $2,103 and the value 

of benefits lost was $34.7 million. 

About 5,600 claimants with losses had vested benefits and their 

average loss was about $3,200. 

Slightly less than half of the retirees in plans with losses experienced losses; over 90 percent of current employees in those 

plans also experienced losses. 

Only 15 of the 596 plans with losses had superseding pension plans; 

the 15 plans included 2 percent of all claimants with losses. 

Two-thirds of the claimants with losses were in plans in operation 

5 years or more prior to termination. 
- 4 -

The majority of terminated plans in 1974 were small (less than 10 

claimants) . but accounted for only 8 percent of all claimants · 

with losses. A few large plans (500 claimants or more) accounted 

for 21 percent of claimants with losses. 

The ~ajority of plans terminated because of specific business 

actions, such as sale, transfer, or merger of the business; liquidation, dissolution, or bankruptcy of the business, and the closing 

of a plant, division,or subsidiary. 

Multi-employer plans (Labor study) 

121 jointly-administered multi-employer pension plans under collective 

bargaining reported termination between 1965 and the end of 1973. 

Benefit losses among multi-employer plans had a low incidence, 

about one percent of the participants in terminated multi-employer 

plans. Nevertheless those who lost benefits, lost most of their 

accrued benefits. 

Most multi-employer plans terminated because of merger into another 

plan. A few terminated because of financial insolvency. 
5 -

III 

Number of Terminations and Claimants and Extent of Benefit Losses 

The study covered 1,314 pension plan terminations (with 40,500 

claimants) reported during 1974. All 20,700 claimants in 711 plans 

had no losses because these plans had sufficient assets to cover 

all accrued benefits. About 16,500 out of 19,400 claimants in 

596 plans lost benefits because of insufficient assets at termination.!/ (See Tables III•l and III-2-) 

Typically, those who lost benefits lost almost 50 percent of their 

benefits. The average present value of benefits lost per claimant 

was $2,103. The total present value of benefits lost for all 

claimants was$34.7 million. 

Approximately 5,600 of the claimants with losses had vested 

benefits, i.e., they were retirees, persons eligible for early or 

normal retirement, and current or past plan pa~ticipants wi~h 

vested benefit rights. The average present· value of benefits lost by 

the 5,600 yested claimants was about $3,200. The total benef~ts· lo~t 

by all claimants in these specific categories were $17~7 million. 

Another $17 million of benefits was lost by 10,900 other active participants, including an unknown number who were partially vested before termination. 

ll Benefit data are not available for 7 plans with 344 claimants. 
Table III-1 

ComoaTison of 1974 and 1972 Trea.sury Department 

Studies of Pension Plan Terrr.inations 

1. Number of terminating plans 

2. Number of cl.aiffiants 

a. Average number of claimants per plan (2/1) 

3. Number of nl.2.ns with losses 

a. Percent cf plans with losses (3/1) 

4. Number of claimants with losses 

a. Percent of claiI'.lallts with losses (4/2) 

b. Averar;e number of claimants with losses per 

plan with losses (4/3) 

5. Tote.l accrued ber:.efi ts of plan~ (present value) 

( $ thcusa..."1.d) 

6. Tota~ accrued benefits of plans with losses 

(present value) ($ thousand) 

7. Total amount of benefits lost ($thousand) 

8. 

10. 

11 • 

Benefits ner claimant with loss 

(present ~alue) ( 6/4) 

Average loss per cle.irnant with loss (7 /4) 

Percent of benefits lost by claimants with 

loss (7/6) 

Loss per pl.an with losses (7/3) 

1974 

1'314 

40,532 

30.8 

596 

45.4% 

16,507 

40. 7% 

27.7 

$205,838 

$73,958 

$4,480 

$2' 103 

46 .. 9% 

$58,257 

Published 

report 

1, 227 

42,019 

34.2 

546 

44.5% 

19,396 !+6. 'Cfo 

35.5 

$91,065 

$48,694 

$4,695 

$2,510 

53.5% 

$89,183 

1972 

Two large loss 

Plans excluded 

1,225 

38,993 

31.8 

544 

44.h% 

16, 370 

42.0'/o 

30.1 

$160,584 

$62,232 

$32,762 

$3,802 

$2,001 

52.6% 

$60,224 
- 7 -

When compared with the findings of the 1972 study, there were 

more terminating plans in 1974 but the number of ·1osing claimants was 

less by about 2,900 or 15 percent. Of the 16,500 claimants with 

losses, 34 percent were retired, eligible for retirement, fully 

vested, or vested former employees (the so-called "high priority" 

claimants), down from 44 percent in 1972. The aggregate loss of 

$34.7 million was down by 28 percent -- almost $14 million -- from 

the $48.7 million lost in 1972. 

The lower amount of losses in 1974 is attributed to (1) fewer 

claimants per plan with losses and (2) lower losses per claimants. 

The average amount of benefits lost in 1974 was $2,103 per claimant 

with loss, which was 47 percent of the claimant's total benefits 

(present value). In 1972, the benefits· lost was $2 ,510 per claimant 

which was 54 percent of the claimant's total benefits (present value). 

Total benefits accrued per claimant with loss was roughly the same 

in 1974 as in 1972. 

In comparing the 1972 and 1974 studies, it is interesting to 

note that the earlier study included two large plans with large 

losses. If these two plans are excluded from the 1972 data, many 

of the differences between the results of the two studies are 

substantially reduced. Average benefits lost in 1972 by claimants 

with loss drops to $3,802 per claimant after the "adjustment"--$680 lower 
- 8 -

than the 1974 figure. Without adjustment, the average 1972 benefit 

loss was $215 greater than in 1974. This does not mean, of course, 

that the 1974 results are "truer" or "more representative", since losses 

attributable to large plan termination should be expected to occur from 

time to time. 

Categories of Claimants in Terminated Plans 

Under law in effect in the survey year when a qualified pension 

plan terminttes, all active participants including those who have not 

vested prior to terminatio~, vest in their accrued benefits. That 

is to say, they have legal claims against the assets of the pension 

plan. Those who have already retired and former employees who leave 

the scope of the plan before retirement with vested rights also have 

legal claims against the plan. However, unless the plan has sufficient 

assets, some claimants will receive less than the present value of 

their accrued benefits. Pension plans usually establish priorities 

for distributing funds. One would expect plans first to allocate 

funds to satisfy in full the claims of retirees and other current 

beneficiaries. If any funds remain, these would be used to pay the 

claims, in descending order, of participants eligible for retirement (normal and then early retirement), current and past participants 

with deferred vested rights, and then all other active participants. 
- 9 -

TableIII-2 shows number of claimants in all terminated plans, 

terminated plans without losses and in terminated plans with benefit 

losses by these categories of claimants. There are persons experiencing 

benefit losses in each claimant category, although losses are most 

widespread among the lower priority categories. Overall 48 percent 

of all claimants were in plans with losses while 41 percent actually 

experienced losses. Those who experienced losses represented 85 

percent of the claimants in plans with losses. Forty- seven percent of 

the retirees (category 1) in plans with losses experienced losses, 

while 92 percent of current employees in those plans (category 2, 

3, 4, and 6) also experienced losses. About 82 percent of former 

employees with deferred vested rights experienced losses in those plans. 

Amounts Lost in Terminated Pension Plans 

Typically, benefits accrue with years of service. Thus, accrued 

benefits will usually be higher the longer the service of the 

employee. Benefit formulas are often linked to career or final 

compensation levels, either explicitly as a percentage of pay for each 

year of service, or implicitly in the form of fixed dollar amounts per 

year of service which are adjusted periodically. As compensation 

levels increase, or as benefit formulas are liberalized, benefit 

levels increase also. However, these increases usually are not shared 

with persons who cease active participation in the plan either through 
..... 

----. -.. -------

CATEGoqv OF CLAIMA NT 11 

TOTAL 

l • R~ TI REES ANO 

Bt-NEFICIARIES 

2. PARTICIPA~T~ tLI~IBLE 

FUR NORMAL qfTIRE~E T 

l, PARTICIPANTS f.LIGI~LE 

FOR EARLY RETIREME 'H 

4. PARTICIPA NTS 

FULLY VESTED 

s. FORMER EMPLOYEES ~ITM 

DEFERRED VESTED ~IGHTS 

o. 4LL OTHER ACTIVE 

PARTICIPANTS 

T A~LE. III-2 

t\J U 1-' M F..~ f1 i:: P € ~ ~ S I ; H R M I N A T E 0 PE ~J ~H 0 ~ _ PL A"N S 

i;Y CATEG ~V Or CLAl"1A NT:, 1CJ74 

- - w - • - - - • - - • • . -. . - . - ... - ....... NU~BER JF CLAI~ANTS PLAl\tS WITH LOSSES W___; 

------- - . - . . - - -. -. . --. . . . . ALL PLANS I . TOTAL CLAIMANTS wITH LOSS 

-. - . - . . I CLAI~ANTS I 

IN Pl.ANS I 

I llilTH LOSSt.S I 

Tf~M I NA TED WITH J(1 I NUt-1BER OF -. . . . • • • • -IAS % OF ALL.I 

PLA"1S ; y Lf1SSf S 'JI I CLAIMA .\ITS NUMBER PERC~NT I CLAIMANTS I 

OF TOTAL. ( l/ 1) I 

( 1) ( 2) (l) (U) (5) Cbl 

4 0,5 32 20,7/J1 1 ~U47 16,501 au.q 48.0 

5812 3197 2615 122b Ub.9 45,0 

977 7b2 215 14q . &9,3 22.0 

2372 11bb 120& 800 bb.3 50,8 

55bb nse 2778 2379 as.& "9,9 

2bq1 1371 1231 1007 81.7 "5, 7 

2 3,108 11,"5 7 11,4 0 0 1 O}~"f» qb.O 49,J 

. . . . . . CLAIMANTS 

~ITH L.OSS 

AS l: 

UF ALL. 

CLAIMANTS (~/1) 

(1) 

40,7 

21.1 

15,l 

ll.1 

42, 1 

37. 3 

o. 4 

······-···········--·-··--------------------·······-------·-····-···················-·············································· OFFICE OF THE SECRETARY OF Tl-IE' TREASUIH . May i976 

'·. 

O'FICE Of TAX 4NALYSIS 

11 Each claimant ira.s assigned to the highest priority category for which h~ 

was eligible. Consequently, a claimant is only counted once. ' 

g,/ 1,314 terminated plans 

lf 711 terminated plans with no loss. Sum of columns 2 and 3 will not equal 

column 1 due to the exclusion of 7 plans with 344 claimants where benefit 

situation is unlmown. 

k/ 596 t erminated plans with losses 

...... 

0 
- 11 -

retirement or by leaving the plan before retirement. Thus, the 

accrued benefits of retired employees and former employees with 

vested rights may be less than for active employees with the same 

amount of service. The present value of accrued benefits is related both 

to the amount of accrued benefits and the age of an employee. The 

older the employee, the smaller is the discount for benefits payable 

at retirement. 

TableIIl-3 shows the present values of accrued benefits and amounts 

distributed for claimants with losses. The data indicate that 54 

percent of these claimants lost at least one-half of their accrued 

benefits while 20 percent lost all benefits. The average present 

value of lost benefits is about $2,100 for all claimants and about 

$3,700 for retirees. Amounts distributed to retirees were not a 

larger proportion of their claims than employees eligible for retirement. This indicates that retirees did not have the highest 

priority in the allocation of assets. Retirees with losses received 

on the average 63 percent of their accrued benefits. 

Categories 2 and 3, participants eligible for normal and early 

retirement, contain the oldest, long-service, active employees. 

They have the highest present values of accrued benefits among the 

claimants with losses and the highest average dollar amounts of benefit 

loss (present value), $6,800 and $5,100 respectively. 

Fully vested participants and former employees with deferred 

claims (categories 4 and 5) experienced average losses of $2,400 
-- --. - - -. ---

TABLE. III-3 

PRFSEt-.T VALuE n~ ACC~UF'[J RE"'\:EFllS 6ND iH1 llUl\lTS DISTRI!;UTED 

~OR CLAIMANTS ~lTH LOSSES, ~~7~ · 

. . - - -. . -- ~ --. . --- -. -. . . -. - . -. - . - ---. . . . - . . . . . . . CLAlMA~TS wIT~ LUSS~S 

C A TE G ~l R Y 0 F 

CLAlt.1ANT 

TOTAL 

t. A~Tll~EES AND 

BENEFICIARIES 

2, PARTICIPANTS ELIGIBLE 

FOR NOR~AL RETIREME~T 

l. PARTICIPANTS ELIGIBLE 

FOR EARLY RETIPEMENT 

4. PARTICIPANTS 

FULLY VESTE.D 

5, FOR~ER EMPL8YEE.S ~ITH 

DEFERRED VESTED RIG~TS 

b. ALL OTHER ACTIVE 

PARTICIPAl\ITS 

CLAit-IANTS 

"'llTH NO LUSS 

PRE SENT TtJTAL 

VALUE tJF I NU"18ER 

TOTAL ACCRUE:r'l I OF ~~μeE~ NU~BER I ~f~E~ITSICLA!~ANTSI 

OF I QF I PEQ · I ~ITH I 

CLAIMA JTSICLAI~A~TSI CLAl~ANTI LOSSES I 

(11 (2) (3) (U) 

0 o,s 32 2 :\bB 1 

5812 1226 

828 10,720 

2372 1572 12,bS 7 800 

55bf) 3187 bl80 

1007 

2 3,108 1~q11 280b 

AMOUNT 

UISTRIBUTEO 

PRESENT • • • • • • VALUE OFI I ACCRU~O I I 

SENfFITSI DDL.LARSI 

PER I PE~ I 

CLA.lMANTICLAl~ANTI 

CS) (6) 

s u~eo ~ 2377 

1 ~178 

1 ~bl Q 85b2 

4851 

3314 1077 

3025 1471 

I 

AS X UFI ,PRE SENT I 

v•LuE. 1 

(b/5) I 

( 7) 

bl 

50 

32 

. . . . . . . . . . . ~ . . . . . . CLAP1A.NTS 

wtTH LOSS 

OF 0 L.EAST 

SOX OF P.V. 

I CLAlt.1ANTS LOSING 

I AL.L BENEF I T5 

- . - . . . . . . IX OF TOTALI 

I Cl..AlMANTS I 

1 ~11..ossc.s 1 

NUMBER I (8/U) I NllMBE.R 

(8) (9) (10) 

368 ] 30 

30 

20 52 

1200 50 709 

84 145 

b317 

. . . . . . 

X OF 

I TOUL 

I CLAIMANTS 

I wITH 

I LOSSES 

I CtO/~) 

c 11 ) 

20>. 

JO 

22 

······---·············-··-··--··-·---·-----·-·-----·--------------------------·--·--·--·------------------··-···-·-··········--···· 

OFFIC~ OF THF SECgETA~Y OF T~f T~F.ASU~Y 

QFfICE OF TA~ A~ALYSIS 

May 1976 

...... 

N 
- 13 -

and $2,200 respectively. All other active participants with losses 

experienced an average loss of about $1,600. It is noteworthy that, 

although former employees with deferred claims might be treated 

preferentially over nonvested active participants, the study found 

that in practice the plans often treated this group less favorably. 

Plans distributed 32 percent of accrued benefits to former 

employees while all nonvested employees received 49 percent of 

accrued benefits. 

In 1974, the average present value of accrued benefits, as 

in 1972, was higher for the first 3 listed categories (retirees and 

beneficiaries and claimants eligible for normal and early ,retirement) 

than for the other categories. Within each of those first 3 categories, 

the present value averaged higher among those with losses than for 

those without losses. (Among claimants as a whole, the reverse 

was true.) As in 1972, it was found that former employees with 

deferred vesting rights were the least favored class in two respects: 

they received the smallest proportion--32 percent--of their PV; and 

84 percent of those with losses--more than in any other category 

lost at least 50 percent of their benefits. 

Distribution Priorities within Claimant Category, "All Other Active 

Participants" 

Average accrued benefits and the average dollar loss are 

smallest for claimants in the category "all other participants." In 

general this reflects the relatively younger, shorter service characteristics of persons in this category. But there are older persons 

in this category as well, particularly in the plans with limited 

vesting provisions. Moreover, while the survey data does not 
- 14 -

show it, some terminated plans had age priorities for the distribution of plan assets among claimants in this category. In 

these cases, the survey did not generally show the substantial 

difference in benefit losses experienced by older and younger 

claimants. 

Claimants with Losses Going into New Plans 

While a number of terminated pension plans do not have 

sufficient assets to pay all accrued benefits, in some cases 

claimants may be taken into new pension plans. If the new plan 

assumes the assets and liabilities of the old plan, claimants may 

not lose benefits. As is discussed later in the Labor study, most 

multi•employer plans that terminated between 1965 and 1973 were 

merged into larger multi-employer plans which assumed the liabilities 

of the terminated plans. However, as shown in Table III-4 only 

15 of the 596 plans reported terminated in 1974 with claimant losses 

had superseding pension plans. The number of claimant~ · with losses 

in these 15 plans accounted for only 2 percent of all claimants with 

losses. In 1972, claimants in losing plans superseded by pension 

plans were 12 percent of all claimants with losses. 

Seventy-two plans that terminated with claimant losses had 

other types of superseding plans, particularly profit-sharing plans. 

These plans accounted for 10 percent of all claimants with losses. 

A superseding profit-sharing plan would not assume the liabilities 

of the terminated pension plan although it would offer the claimants 

from the terminated plan an opportunity to accumulate future retirement benefits. 
C A TE r, 0 ~ Y 1.1 F C L. ,\ 1 " t. ·. T S 

--- - - - ~ - . - . t, FtET IPE:.f. S A".U 

BE".IEFlCIARlES 

·. 2, PA~TIC!PA~TS ELl~I~Lt. 

F' () ..( r-. 0 t< ~ A L ~ t..T I ~ f · f. "" l 

3~ PART!Cl~A~TS ELJG!dl~ 

FOR EA~LY R~TIQ~~FNT 

4, PA..? TIC IP 4 TS F •.J LL v vt S H .l• 

P ~ ICH~ r '°' re R "' 1 1·J A r 1 ' '"' 

5. FQqMfR E:.~FlJYEES ~rr~ 

)E~t.~RED CLAl ~s . 

be ALL OT~E:.~ ACT!vt 

PART l C lf ~ T 5 

7, TUTAL 

TA- Lt III-4 

. . . - ALL T~R~t~ATt.D P~A~qlTtPMl AT~D PLA JS ~lTHIT~~~l~AT~O PLANS ~lT~ITE~MI~ATt.O PLANS WlTM ~ITH L·JSSt.S E1 P~ SIQ~ PLANS I OTHt.R NE~ PLANS I ~U Ntw PLANS 

• , - - - - - - - . - . - - . . . - --. . . -- -. - . -- --- . -- . . -. . . I NL•r-ABE ~ :)F I . x :~ I ·u~~t.~ 'lF I ~ [N NU1"bf:.~ (lF' I % It-.; Ui.!Ht.R OF ~ IN 

i CL A I '1 A t,1 T S I C ~ T E r; r·, ~ 'f I CLAJ~A,..., TS IC Alt~LW'f I CL~ I 1-1ANT S ICATEGO~Y I CLAI~• -..rs I CAT!GO~Y 

I IN IT~ UJSSF- SI I"' I TH L0SS£~1 ( ~/ l) I !Ai IT r1 LOSSES I ( c:; 11 ). t~ITH LOSSES I (1 /t) 

-- - - . .. - .. -.. - -. ~ - ~ 

-. • rer .. .. Cl) ( 2) (3) ( u) ( ~_) ( b) (7) 

122& 11 _1 1; ;\' ti • 7 ;>Q 2.u 11 sq -· en IQ 

. . .. 1uq 1 tJ I e I , 14 QI (j lj '. tJ no b7,2 

8ou t 0 I).\.) 17 2. 1 1-13 1 0 ~ u 700 87,5 

t!. 37"1 11111. (j 1 s .~ qs u.o 22oq 9';. u 

101.17 1 ll () . u 15 1 • ~ 20 2,0 'H2 9o,5 

1 u,9ub } •l C) • \) ~Ji+ ~. 1 tuqB 13. 7 q21U 8ij. 2 

I -

\ t/~:)I ' 7 1 i! I , e \) "§11 3 1 • ~ 1 730 l 0. ';) 1"}'7£J R7,1 

· S% 15 72 soq 

OFF ------------------------·------~----·-------------------·-------·-------------·---~-----------~~---~-----------~---- !Ct <) ~ fHf- !-iF:,C.:>l='H·hllf Lt~ ,,...~ T~FASIJ~Y .: . ., · May · 1976 

(} F"F- I. C ~ .: ; F l ~ i 14 • ~ L Y ~ T S 

....... 

U1 
- 16 -

As shown in Table III-4, there were about 1 4, 500 claimants 

with losses in 509 terminated plans with no superseding plan of 

any kind. These claimants account for 88 percent of all claimants 

with losses. 

Aggregate Value of Benefits Lost 

Table III-5 shows the value of benefits lost by claimant 

category. In aggregate, the present value of benefits lost by all 

claimants in surveyed plans is about $34.7 million. The highpriority claimants--retirees, participants eligible for retirement (early and normal), .fully vested participants and vested 

former employees--account for one third of all claimants with 

losses and one-half of the value of benefits lost. 

The figures of Table III-5 include benefit losses of the 

16,507 claimants, who in some cases, would be included in new, 

superseding pension plans (only. 303 claimants in 15 plans). Their 

losses could be made good by the new plans. However, there is no 

measure in the study of the extent of losses recovered in new plans. 

Table III-5 , therefore, somewhat overstates the losses that 

actually occur. 

The claims of "all other active" participants accounted for 

about one-half of the aggregate dollar losses of $34.7 million 

sustained by all claimants; in 1972, this category accounted for 

only 29 percent of the total loss. 

Benefit Losses in Relation to the Private Pension System 

At present, about 30 million workers, are covered by private 

pension plans. The 40,500 claimants in plans reported terminated 

during 1974 and the 16,507 claimants with losses amount to only 
TABLE : III-5 

PRESENT VALUE OF B~NEFITS LOST 8Y CLAIMANT CATEGORY ' 197• 

. -. -. - -. --. . . . ---. . --. . . . . . . . . . . . . . . . . . . . . CATEGORY 

0, CL•\It-1ANT 

t I 

I NUMB~~ OF I I LOSS BV 

I CLAIMANTS IAVERAGEt CLAIMANT 

IWITM LOS!ESI LOSS I CATEGORY 

- - . -. -. . . - . -. -. -(1 -~ - - . . ·( 2 . j . -. "( ~ 3 -

> - 1, RETI~EES AND 

BENEFICIARIES 

2, ~A~TICIPANTS ELIGIBLE 

FOR NOR~AL RETIREMENT 

3. PARTICIPANTS ELIGIBLE . FOR EARLY RETIREMENT 

u, PARTICIPANTS 

FULLY VESTED 

5. FORMER EMPLOYEES wITH 

D!,ERRED VESTED RIGHTS 

b. •LL OTHER ACTIVE 

P•RTICIPANTS 

ALL CLAIMANTS 

Sl74b 

149 b758 1,007,000 

800 5-057 

/ 

2379 5,81 ~800 

1007 2238 

10,94b 1553 1 ~o o ",o o o 

1~507 SitOl 

t LOSS BY ICUMUL4TIVI LOSS 

ICAT!GOAY ASI BY CAT!GO~Y 

I PERCENT OFI AS ·.PERCENT 0, 

I TOTAL LO!SI TOTAL LOIS 

--········~--- {4) 1(5) 

27.8 

51.0 

100,0 

100.0 100.0 

······················································-···························· O'FICE O' THE SECR!TARV O' THE TREASURY OF~ICE OF TAX ANALYSIS . · .. Kay .1976 
- 18 -

0.135 percent and 0.055 percent, respectively, of workers covered 

by private pension plans. If one assumed that the risk to an 

average worker of benefit loss due to plan termination were about 

0.055 percent annually (i.e., 1974 was a typical year), the risk of 

benefit loss over a 10-year period of plan participation would be 

0.55 percent and over a 30-year period, 1.65 percent. 
- 19 -

IV 

Characteristics of Terminated Plans 

The study provided data on plan characteristics including 

distribution of plans and claimants by plan age, size, method of 

funding, and reported reason for termination. Information is also 

provided on the employment patterns of plans in the years prior to 

termination. 

In general, ~ost claimants, and most claimant's with losses, 

were in plans with 100 or more claimants, and in plans at least 

5 years old at time of termination. About one-half of the plans 

experienced declining numbers of participants during the years 

prior to termination. Almost one-half of the terminations were 

due to poor business earnings or closing of the business. Those 

terminations accounted for almost one-third of all claimants with 

losses. But terminations may also be due to the closure of a 

particular plant, division, or subsidiary, but not the entire firm. 

Those terminations were only 6 . percent of all terminations but 

accounted for 38 percent of claimants with losses. 

Distribution of Claimants by Age of Plan 

Newly established plans usually grant past service credits to 

their active employees, thus creating initial unfunded liabilities. 

Should such a plan terminate before this liability is funded, 

losses would result. If the termination comes early in the life of 

the plan, one would expect losses to occur. But older plans, too 

can have substantial unfunded liabilities, either because original 
- 20 -

liabilities were not funded or because additional unfunded 

liabilities had been created through benefit increases based on 

past as well as future service of plan participants. Both young and 

old plans terminated with unfunded liabilities, and therefore benefit 

losses. 

While the majority of all cl~imants were in older plans (10 

years or more) about one-third of the claimants with losses were 

in those older plans. But the great majority of claimants with 

losses, 67 percent, were in plans at least S years of age at time 

of termination. (See Table IV-1.) 

Categories of Claimants With Losses By Age of Plan 

There are significant differences in the importance of 

categories of claimants with losses among plans of varying age 

groups. Specifically, vested claimants and retirees are a much 

higher proportion of claimants losing benefits among the plans 

at least 5 years old. Table IV-2 shows the distribution of claimants with losses by plans in.broad age group categories. 

High priority claimants as a group (retirees, claimants eligible 

for early or normal retirement, vested claimants, and former 

employees with deferred claims) account for only about 10 percent 

of all claimants with losses in plans under 5 years of age. But 

high priority claimants account for 45 percent of claimants with 

losses in plans at least 5 years old. Retirees account for 

about one percent of claimants with losses in all plans under 5 

years old. In plans 5 years old or more, retirees account for 11 

percent of all claimants with losses. 
TA ~Lt. IV-1 

r, 1 s T 0 I ~ I I T I J.... fl ~ c L A l ,.., A \i l s f4 y A G E ! ·, F T t ~ ~ l \! A T E. 1) p L A /\1 , , 9 7 4 

--- -- --- . -. -- --. -. ---. - ---- - ---. -. . . -. • • • . • • . ALL ~L u,s PLA"S WITH LDSSE.S 

I \:IJ '~ ~F ~ CLAJ1.1ii..1TS I ...iu'1'1RF;:~ (1 F- ··I lJ"' ~ ~ ~ nF I CLA!'-'OJTS w IT Ii rnssEs AGf.: OF- PL4~ l'IJl lv ~E~ I C U ~: U L A T I v I: I PLH•S CLAlMA 1 1TS I t..ilJMBE~ I CUMULATivE I AS t OF ALL ~E!oiCE"'T I PERCENT I CLAIMANTS IN 

I I AGE GROUP -- . -- -------( 1 ' - -tn · - --- -·c 3,. - - 1~1 - t5) -(~~ 

..... - ( 

. 

7) 

. . . 

(8) 

. . • • -

TOTAL 1 '1 u lJ ·~., 3? 5qb 1~"u7 \ ~507 uo,7 

UNDE~ O~E YE A4 ?.7 30 0 • 7 t 0 1 t t 111 • 7 37,0 

t Ur..;OE~ 3 VEA"' .c; 187 3~11 Q,o QIJ ?732 2o7Q 1b,q 7Q,2 

3 UNDtR s VEAr.<S 25b lJ?,, 7 20.2 UH~ 2q2?. 2702 33.J b31'3 

'5 UNDER 1 0 YEARS UH 11,s 31 u 8. f) 20b 0 :1c;1 5000 b3,o ~ 3, a 

1 0 VE,ARS AND CJVE~ " 1 1 2 018 t 7 1 0 ll. 0 1 38 7o 31 b009 100,0 28,q 

····---------·-------------------------------------------·--······-·····---------·-··--················-·····-- OFFICE OF THE SEC~ETAIH UF T~E T!<EASl.J~V 

uFFICE OF TAx ANALYSIS Mav. 1976 

N 

I-" 
l ABLE IV-2 

CLA!"'t. "' TS ITH LOSSES 8Y CL A J ,, AN T C ATEG tJIH A~ {) AGE OF PLAN• 1974 

. . . . . .. .. . . - . --. - - - --- -. . - ---- --. ---. . .. -. -- . . "~IG~ PRIORITY" CLA.JMA.NTS I ,_ -.. -. --. -.. ---. . - . . . . •I OTt-ttR AC TI Vt: 

AGE I CLAIMANTS FULLY VESH:D I PARTlClf-1ANTS r1F Tfi TAL E.LlG18LE FOR I CLAIMANTS ANO I Al\JO UNCl.ASSl• 

PL A '\1 HlTAL ~ETIREES "'IORMAL ANO IFO~MER E.MPLOY•IFl~D CLAIMA NTS 

C3+4+5) EARLY I EES WlTl"I DE• I 

RETIREMENT I FERR~O CLAIMS! 

--. .. . . .. . . . -.. . . . . . . . Cl) ( 2) ( 3) ( 4) ( 5) (b) 

JJTAI. r..io. OF CLAIMANTS 16,'5 v 7 55b1 122b q4q HBb l o,q4o. PERCE NT OF TIJTAL 1 0 l) 34 7 b 21 eo 

UNO ER J·. · Y E A ?S 

NO. 0 F C L A t "1 A r'j T S 21qo 377 45 "" 288 2" 13 

PERCE.NT OF r:JTAL 1() 0 14 2 2 10 Bb 

~ Y~ARS UNDt:R s 

l\JO • OF CLAJMt.NTS 2702 18b 17 '49 120 2Sle 

PE.RCENT OF TOTAL 100 7 1 2 4 q3 

5 YEARS U~O,R 10 

NO. OF CLA!MA"'iTS SO Ob 2270 57q 517 llbO 2730 

PERCENT OF TClTAL 100 45 12 11 l3 55 

10 YEARS OR MORC. 

NO. OF CLAIMANTS oooq 2722 585 319 1818 3287 

PERCENT OF TOTAL 100 tiS 10 5 30 55 

---······-·······························--·-···-·················-······························-·-·-······ OFFICE OF THE SECRETARY OF TH~ T~EASURY 

OFFICE OF TAX ANALYSIS 

May 1976 

N 

N 
- 23 -

This pattern of categories of claimants with losses by age of 

plan is not unexpected. When a pension plan is established, it is 

unlikely to have any outstanding obligations to retired or other 

former employees. Moreover, if vesting provisions (where there are 

any) apply solely to service after establishment of a plan, no one, 

initially, would be vested. As a plan gets older, the number of 

retirees increases, while increasing number of active employees 

will qualify for early retirement or vesting. Thus, one would 

expect older terminated plans in general to have a greater proportion of high-priority claimants. 

Amount of Benefit Losses by Age of Plan 

, Table IV-3 shows the distribution of present values of benefits 

lost by age of plan at termination. As is shown, plans less than 3 

years old account for only 10 percent of total benefit losses. Plans 

at least 5 years of age, but under 10 years of age at time of 

termination account for 32 percent of benefit losses, while those 

plans 10 years of age and older account for 43 percent of benefit 

losses. The distribution of benefit losses is more concentrated 

among older plans than the distribution of claimants with losses. 

This reflects the higher average benefit loss in older plans. 

Claimants with losses in plans less than 3 years old lost an 

average of $1,244. The average loss was $1,929 for plans at least 

3 years old but under 5 years, and $2,212 for plans at least 5 years 
T Ae'Lf:. IV-3 

DISTRIRuTJO~ uF ~ENEFIT LOSSt.S ~y AGE OF PLAN' ,97U 

--- -------.. -. --- -----. --. - --.. -. . ---. ---. . . . . . . -. . . . . . . . . • . . . '\JU Bi;"~ r1F PRESE.~ T VALUE AVERAGE LOSS PRE.SENT VALUE t CUl'ALJl..AT l VE CUMULATIVE ~ 

AGf '.1F CLAirvAt TS OF BENEFITS PE~ CL~JMANT OF BE~EFITS LOSTI x Of RENE FITS OF CL.AIMhJTS 

PLO.I WJTH ns~ E~ LOST wJTH LOSS AS x Cl" TOTAL I LOST WlTM LOSSt.S .. - . . -- ---- - ---- -. ... - . . ---. --. •. . . -. . . . . . . . . . . . ( 1 ) <2.) ( 3) (LI) (5) (b) 

... i,,:!",. 

U·'llDER 3 YEARS 2 7 q (• I ! 3p 7 o,7 0 0 I $1244, 10,0% 10.ox tb,ql 

3 UNDER '5 YEARS ?702, ~2 l l,t 0 0. 11:1zq, 15,0 25,0 H,3 

5 UNDER 1 0 YEARS S<llJb, 1 11

0 7 4,3 0 0 I 2212. '31. 9 Sb,q b3,6 

10 Yt.AwS AND OVE~ bOQQ, 14,qb2,80 0. 2LIC10, 43.t 100.0 100,0 

TDTi'L 16,50 7. 134/20,CiOO, !2103, 100,ox 100,ox 100,0% 

•••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••~r••••-••••• 

OFFICE OF THE SECRETARY UF TH~ T~EASUQY 

OFFICE OF TAX ANALYSIS 

I 

May- 1976 ' 

I'.> 

.po 

. , 
- 25 -

old but under 10 years. Among plans 10 years of age and over, 

the average loss per claimant with loss is $2,490 about twice as 

much as the average loss in the youngest age group of plans. The 

higher average losses in older plans are due in large part to the 

greater proportion of high priority claimants with losses in older 

plans. Average losses by high-priority claimants are greater than 

the average losses for other claimants. 

Size of Plans 

The majority of terminated plans are small. As shown in 

Tab le IV-4, 781 or 59 percent of the 1,314 plans in the survey had 

fewer than 10 claimants. But only 8 percent of all claimants and 

of all claimants with losses were in such plans. On the other 

hand, only a few large plans (500 claimants or more) accounted for 

21 percent of all claimants and of claimants with losses. 

There was no explainable pattern with respect to the proportion 

of claimants with losses within each size group. Small and large 

plans show about the same proportion of claimants with losses--

roughly the same as the overall ~•erage of 41 percent of claimants. 

On the other hand, those who do lose benefits in the smaller 

plans show larger than average losses. It is noteworthy that 

considerably lower losses per claimant occurred in the six 

largest plans with 500 or more participants. 
TA ~LE IV-4 

DI~TRIRUTION 0~ Cl.~IMA~TS SY SIZE --fl.:UMRER UF CL&IMANT5--0F TERMINH!O PLA~, 1Q74 

------ . -. - - . . . 

ALL -. PL -hS - . . . -. . -. . -. . . . . . . . . . - . - - . . . • • • • • • • • • • ...., I I~ CL& MA\ ~U,..8E 0 S l ZE ~ PL ... , ~IJMAER I CU ... UL.Ar I VE PL4NS NUMBER- - ·~WM8E~ OF PERCENT U ' OF •LL CLAIMA~TS CL.AlMANTS lN 

.. SIZE GROUP - -. . . . - • • - . • • . . . . . . . . -. . . . .. . • • . -... • • . . - • • • • • • • • • ca; . • • • ( l) <2) ·u> (4) (5) Ct•) ( '7) i .. -,i · • .. • • .II . 

TJTAL. , 3 t" "0,532 sqo 1q,447 1~507 40.1 

UNOEQ 3 245 lCJ~ ,91 CJ8 1 b" 1U ,qe "t • 0 

3 U~DER 5 2l4 11:J 2,88 lOS Jb~ ]]1 J.02 "li 5 

5 U~OEA 10 312 2013 e.oo 135 •01 842 8,U UO,b 

10 UNO!A 20 223 JOlt 15,45 11 t t!OI 1J10 1&,4i 45.3 

lO UNOEA 50 1 !J] GIUIO z•.01 '12 lOetl 1187 n.2s tJ 0. 2 

50 UNDER 100 14 1Ju,o Jt,1a l• U71 UH 31,48 32.7 

100 U~DER l50 41 1HO 58,08 28 4J18 n2• u.01 48,& 

250 UNO!R IJOO 25 1546 79,17 tl J••t JOq2 18,80 3&,2 

500 ANO OVER. 11 •••J t i-Q. 00 6 ;4 t 0 8 14•• 1

1 l 00 I o_o.- 0 ·" 

···································-····-·-························································-······-···· 0''1C! 0' T~E SEC~ETA~V 0, T~! TOEASuQY 

O''ttt 0~ l~i lNlL~~lS May 1976 
- 27 -

Number of Present Value Present Value 

Claimants of Percent of of Benefits 

In Plan Benefits Lost Total Loss Lost Per Clmt. 

With Loss 

Under 10 $ 5,339,600 15/o $3,982 

10 under 100 12,843,000 37 2,650 

100 under 250 4,640,800 13 1,245 

250 under 500 8,878,900 26 2 ,872 

500 under 1000 2,304,500 7 921 

1000 and over 714, 100 2 716 

Total $34 '720 '900 100/o $2,103 

Plans with fewer than 10 claimants account for 15 percent of total 

losses, but they account for 8 percent of all claimants with losses. 

The average benefit loss in the smaller plans is almost twice the 

average loss for all plans. Some of the high losses in the small 

plans are attributable to claimants who were owner-employees of 

the firms that terminated the plans. 

Two main differences emerge from a comparison of the results 

of this study with the 1972 study: (1) the tendency seen here for 

average benefits lost per claimant with loss to decline with increasing size of plan was not apparent in the 1972 study; (2) 

while plans of 1,000 or more participants in 1974 accounted for only 

2 percent of the total in lost benefits, plans of this size in 1972 

accounted for 33 percent of the total loss. 
- 28 -

Medium of Funding 

The incidence of claimant losses in plan terminations is related to the medium of funding. Roughly the same number of selfinsured plans terminated in 1974 as the number of carrier-insured 

plans. However, the self-insured plans were substantially larger 

plans. As shown in Table IV-5, 24,429 or 60 percent of all 40,532 

claimants were in 404 relatively large plans which were self-insured. 

In 378 of these self-insured plans, assets were placed in general 

investments. The remainder were invested solely in mutual funds 

(regulated investment companies). 

Benefit losses were reported in almost half of the self-insured 

plans. The 193 self-insured plans with losses accounted for 

60 percent of all claimants with losses. 

The incidence of losses among the 391 plans which were funded 

exclusively through an insurance carrier in the form of individual 

or group annuity-type contracts was far less. These insured plans 

with losses accounted for only 20 percent of all claimants with 

losses. 

The incidence of benefit loss was less for plans funded exclusively through individual annuity contracts. A plan funded 

exclusively ~hrough individual annuity contracts has by its nature 

no unfunded past service liabilities. Also, scheduled benefits are 

guaranteed to the extent premiums are paid. Except for the earliest 
Table IV-5 

Distribution of Claimants By Medium of Funding, 1974 

All plans Plans with losses 

Claimants Claimants with Claimants with 

Medium of Funding Number Number Number Total Number losses as per- losses as percent 

of of of number with cent of all of all claimants 

plans claimants plans losses claimants (5/2) in plans with 

losses (.5/4) 

( 1 ) (2) (3) (4) (5) (6) (7) 

Total 1 ,314 40,532 .596 19,447 16,507 40.1% 84.CJ'/o 

Insured, total _?91 8,773 142 ?,,}31 3,22.5 36.8 86.4 .. - - -- -.. --··-· .. 1 . Individual Annuity 

Contracts ...•.....•••.• 227 1,568 71 .522 449 28.6 86.0 2. Group Annuity Contracts 164 7,205 71 3,209 2,776 38 . .5 86.5 I 

Self-insuredz total ____ i±Obt 2bt2bt22 123 

3. -stock of Regulated 

11 2 60l:! 2,221 ---- --- ---·-----·- . - _._8_5_._5. N-

'f 

Investment Companies .•• 26 1 '.570 12 1'196 1'188 75.7 99.3 

4. General Investments .... 378 22,859 181 10,408 8,733 33.2 83.9 

8Elit-funding2 total f±02 l±2020 

5. Individual Annuity Con202 22074 1'947 48.4 93.9 

tracts and Other Medium 38.5 3,571 199 1, 995 1,872 52.4 93.8 6. Group Annuity Contracts 

and Other Medium ...••.. 17 449 6 79 75 16. 7 94.9 

Other or Not Shown 2 total 117 3,310 56 2,038 1,414 42.7 69.4 

7" Other . ................. 38 540 14 261 261 ~n -- 100.0 

8. ~Tot shown ••.••••.....•. 79 2, 770 42 1,777 1'153 41.6 64.9 

Office of the Secretary of the Treasury May 1976 

Office of Tax Analysis 
- 30 -

years (particularly the first year) when the sales commission element 

of premiums is high, pension plan losses can occur only if premium 

payments lapse prior to formal termination o.r if cash values of the 

policies are borrowed. As shown in line one of Table IV-5> only 

71 of the 227 plans funded exclusively through individual annuitytype contracts showed benefit losses. Only 29 percent of all 

claimants in all plans so funded lost benefits as compared to an 

overall figure of 41 percent for all plans with losses. 

One would expect a lower percentage because of full current 

funding of all benefits required under this method. Full current 

funding of benefits is most relevant for a plan of a firm which 

is unlikely to continue beyoni the working life of its owners. This 

situation would be found most frequently in small plans. 

Other insured plans in the survey funded benefits exclusively 

through group annuity-type contracts. Under this type 0£ contract, 

there can be unfunded past service liabilities. The insurance 

company contract guarantees benefits only to the extent paid for. 

Benefit losses will occur if a plan terminates before past service 

liabilities are fully funded. 

There were 164 plans in the survey that funded benefits 

exclusively through group annuity contracts of which 71 showed 

benefit losses. Thirty-nine percent of all claimants in plans 

funded by this method lost benefits. This is a higher percentage 

than for plans funded exclusively through individual annuity contracts. 
- 31 -

A number of plans, 402, provided benefits through split funding, 

partly through annuity-type contracts and partly through another 

funding medium, usually equities. As in the case of self-insured 

or self-funded plans; split-funded plans also showed a substantial 

number of claimants with losses. The survey indicated that there 

were claimant losses in 205 of the 402 split-funded plans in the 

survey. Of the 2,074 claimants in such plans with losses, 1,947 

or 94 percent lost benefits. However, in relation to all 402 

terminated plans with split funding, 48 percent of the claimants 

lost benefits. It is notewbrthy that for the few plans that combined 

group annuity-type contracts and other funding mediums, the relative 

frequency of loss among claimants was very small. 

Employment Patterns in Years Prior to Termination 

While a number of other specific reasons may be given for a 

plan termination, a decline in the number of active participants· in ~ 

a plan can itself indirectly encourage a termination. Of course, 

a decline in the number of active participants prior to termination 

may be simply a reflection of an increasingly unprofitable employer. But for a plan with large, unfunded, past service liabilities, a decline in the number of participants, particularly 

younger participants can cause a sharp rise in costs per employee 

remaining in the plan. 
- 32 -

About one-half of the plans for which information is available 

showed declines in participation prior to termination: slightly 

more than half for plans with losses and slightly less than half for 

those without. As a rule, a reduction in employment involves a disproportionate decline in the number of younger employees, either 

through reduced hiring or lay-off. If past service liabilities 

have not been funded, such a reduction in the number of younger 

participants raises per capita costs for the remaining employees 

because the younger employees account for less than a proportionate 

share of past service liabilities. Thus for a poorly funded plan, 

the aggregate cost may fall, but the increased costs per remaining 

participant of maintaining a plan can be a contributing factor in a 

decision to terminate it. On the other hand, if a plan has funded 

its past service liabilities, any decline in its past service liabilities results in an actuarial surplus and reduced costs for remaining participants. 
PLANS ~ITM LOSS~S 

CMANGES O~ER U YEA? PE~l~O 

'LL 01.•~s 

PLANS ~IT~ ~Q LOSSlS 

PLA~S ~IT~ LOSSES 

PLANS ~ITM NO LOSSES 

PLANS wlT~ LOS!ES 

C~AN~ES OVER 2 VEA~ PERIOO 

ALL PLANS 

PLA~S ~ITH N~ LOSSES 

PLANS ~ITH L0SS~S 

TAoLf IV-6 

. - . . . . -. - . . . . - . . . -- -. . . . . . ALL PLA"-5 25~ DECLINt OR GREATER 

. -- . . --. - . - . . . . - . . . -. -. . - . - . . . - . -. . -. . . . . . - . . . . . . . IT'JTAL ITnHL IPLANS I ~OF' IPIHC. I~ OF' IPLANS I l OF IPRTC. I X OF IPLANS I X OF IPRTC. I' OF 

tPLA'IJS 1P~TC. I I ALL I I ALL I I ALL I I ALL I I ALL I I ALL 

I ( 3+1) I ( 5 + q ) I t PL A l\i S I I P ~ TC • I I PL A . S I I PR TC • I I PL A NS I I PR TC • 

( t ) ( 2) 

Q'55 H,377 

r; 35 1 P.,127 

u 1 7 1u,u1 O 

tn~7 35,?q3 

'5qb 1 q,.ne. 

lJ8 7 ''5,7 t () 

tt97 .H,q51 

b52 20,187 

t 2b8 38,qt 1 

b8q 20,4'bb 

(3) 

252 

213 

537 

b25 

370 

( ti ) CS) 

47.1 ~ens 

uq.u 12,q25 

uq.1 e8bl 

s2. 2 1u,e32 

'51 ·" q31q 

b'i.1 1q,u51 

b5.7 Qutl) 

( b) 

'5 I)• Q 

( 1) 

283 

204 

5'50 

]00 

572 

252 

2lb 

204 

( 8) 

51.l 20,UJ2 

"'·q q752 

OA • q 10,440 

50.b 22,3b8 

50. 3 1 o,us 

so. s 11,~ue 

LI 7 • 8 2 3

1

1 l q 

L18. 5 1 o,8&8 

Lib. b 12,00 b 

lU • l 111 05 0 

35. ~ 8177 

( 1 0) 

52.1 

5 3. 8 

b8.5 

so.o 

su.o 

( 11 ) 

31b 

138 

31b 

172 

?1b 

157 

118 

. . . . . . . . ( 12) ( 1 l) 

H.1 l0,12tl 

32 • q ]LI JLI 

12.2 3013 

13.1 tOel 

CU> 

25.5 

n. o 

··--·--------------···--········--····-·-···-·····~--------····--·-·····-~----·-····-~---·············--·~------·-······-······ OF,lCE OF Tl-it SECRETARY oir THE TREASU~V . . May . 1976 . 

OFFICE OF TAX A~ALYSIS 
- 34 -

1/ 

Table IV-6-shows changes in plan participation over ·s,4, 3, and 

2 year periods before termination.1/ Over the S -year period, 

50 percent of the plans accounting for 61 percent of participants 

showed a decline in participation. Thirty-three percent of the 

plans accounting for 30 percent of participants, experienced at 

least a 25 percent decline in participation. These respective 

percentages fall as the time period considered is reduced. But 

even over the 2 -year period prior to termination, slightly more 

than one-third of the plans experienced a decline in participation. 

These plans included one-half of all participants. 

Distribution of Pension Plans and Claimants By Reason Given for 

Termination 

The distribution of pension plans and claimants by reason given 

by the employer for termination is shown in Table IV-7. The most 

frequently given reasons for pl~n termination were adverse business 

earnings and the liquidation or dissolution of employer organization. 

Of the 1,314 plans, 627 indicated one and/or the other reason. 

ll See Appendix B for revised Table 4-6 for the 1972 study. 

11 Only plans 5 years of age and over are included in the 5-year 

period computations. Similarly, only plans at least 4, 3 and 

2 years of age were included in the respective 4-year, 3-year 

and 2-year period computations. 
TABLE IV-7 

DISTRIB UTI ON OF CLAIMANTS RY REAS ON 'OR ~AT ON , t974 

- . . -. . . . . . - . . --. - . -. . . . . . . . . . - . . --. . . -. . . . . - . . . . . . . . . REASON 'OR 

TER..-lNATIIJN 

TOTAL. 

1 1 CMANGE OF COM• 

PANY O~N~RSHIP BY 

SALE OR TRANSFER 

l, CHANGE OF COM• PA~Y O~Nf RSHIP BY 

lllf RGER 

l, ADOPTION OF Nfw 

SUPERSEDING P~AN 

4, LACK OF EMPLOY• 

E! PARTICIPATION 

5, ADVERSE 8USI• 

NESS EARNINGS 

b, LIQUIDATION O~ 

DISSOLUTION OF 

EMPLOYER FIR~ 

7, SALE, TRANSFER 

AND LIQUIOATION OR 

ADVERSE EARNINGS 

8, MERGER lNO L.l• 

QUIDATION OR AD• 

VERSE EAR~INGS 

9, L.IQUIOATIQN, 

ADVERSE EARNINGS 

ANO OTHf R REASO~S 

10, OTHER OR UN• KNOW~ 

11, CLOSURE OF 

PLANT, DIVISION uR 

SUBSIDIARY 

NU"'18ER 

7A 

ALL PL.ANS 

CL.Al MAN TS 

NUMRER I PERCENT 

1LI01 

ZtU 

lb~7 

t o,r,05 

I IN GROUP 

I -,j,-

100.0 

17. 0 

NUMRER OF I NUMBER OF I CLAIMANTS wITH LOSS~S 

PLANS 1 CLAIMANTS I ~UMBER I ,!RCENT I AS I OF ALL 

I I I I CLAll-IU~TS lt-i 

I I I '~OUP Co/2) 

. . . -. . . - . - . . . - . . . . . . . • (4) (5) ( e., 

590 1~447 1b,501 

117 1888 11." 

21 328 z.o 

b5 155? 

32 1070 A8b 

115 

513 

0 () .o • u 

12 

29 lbO H3 

131 u 027~ 38.0 

···························---------· ·-·-·· ···----·-·-············-····---··--·--·-·········-~-------·-·····~-- OF'1CE OF T~E S!C~ETARY OF T~E TR~AS URV May 1976 

OFFICE 0' TAX ANALYSIS 
- 36 -

Relative Importance of Reasons for Termination 

Reasons Reported for Treasury Studies 

Plan Termination 1974 1972 

Due to business 1/ actions- sn 53% 

Due to adoption of a 

new plan 11 9 

Due to other pl~J 

consideratio~ 26 31 

Due to unknown reasons 6 8 

Total 100% 100% 

ll Change in ownership due to sale, transfer, or merger; liquidation, 

dissolution, or bankruptcy of business; closing of a plant, division 

or subsidiary; or combination of any of the above with adverse business earnings. 

£/ Reasons cited were that there is a lack of empioyee participation or 

adverse - business condition. 

However, if the reasons are grouped broadly (as shown above) by 

those related to the plan and those related to business actions 

(closure or sale of the business, business merger, etc.), 57 percent 

of terminated plans in 1974 were in the latter group. The relative 

importance of the reasons for 1972 terminations by this same grouping 

was roughly the same as 1974. 

In certain cases, the terminations were partial terminations of 

broader company plans, while in others they were complete terminations 

of plans covering specific production units of l'arger companies. There 

is no clear definition of a partial termination in the Internal Revenue 

Code, and thus no certainty that all closures of production units within 

a broad company plan are reported as partial . plan te:rininations. 
- 37 -

v 

Characteristics of Employers of Terminated Plans 

The study provided data on employers by industry and by income 

and net worth. Informatiou is also provided for employers who 

borrowed from pension plans and employers whose stock was held by 

terminated plans. Among plans for which employer industry information 

is available, manufacturing accounred for the majority of claimants 

and a majority of claimants with losses. Examination of plans for 

which employer income and net worth information are available suggest 

that about a foμrth of claimants with losses wer~ associated 

with plans of unprofitable employers. The available data indicate 

that 19 out of 1,094 terminated plans had loans outstanding to the 

employer. Twelve of these plans terminated with benefit losses. 

Industry of Employers with Terminated Plans 

All major industries were ·represented among employers with 

terminated plans. Table V-1 shows the distribution of terminated 

pension plans by industry of employers. Of the 865 plans for which 

employer-industry information is available, 280 plans, accounting for 

64 percent of all claimants and 68 percent of all claimants with 

losses, were in manufacturing. Wholesale and retail trade accounted 

for 221 plans with 12 percent of all claimants and 10 percent of 

claimants with losses. Services accounted for 141 plans and included 

7 percent of all claimants and 7 percent of all claimants with losses 

in plans for which employer industry is known. 

Employer Income and Net Worth 

Data available from tax returns indicate that 27 percent of 

claimants with losses are in plans of unprofitable employers. At 
. . --- . - . - . . l~DlJSTRY 1F 

E~PLOYER 

-. --- -- - -- . . -

AG~ICULTURE, FQQESTRY, 

ANO FJSM1"4G 

MIN I NG 

CO~TRACT C'.J~STQ l.I CT J 1y\j 

· TRA-..SP RPTI ~, Cri"""1lJl\,jI• 

CATJO~, ELECTRIC, GAS 

AND SA~JTARY SERVICES 

WHOLESALE TRADE. 

RETAIL TRADE" 

FINANCE, lNSURA~CE, 

ANO REAL EST6TE 

SE~VICES 

SUBTOTAL 

PLANS WHERE E~PLOYER 

lNOUST~Y NOT IDENTIFIEO 

TOTAL 

. . - . . . . . . . 

ALL . . -- l\IUM8ER 

OF 

PLANS 

( 1) -

.!b 

1 

b8 

2e.o 

.H 

toe 

115 

75 

HI 1 

A~5 

""q 

1 ll IJ 

TERMJNAH.D 

-. --. -. . PLANS 

-. . - NIJ l"Af P 

:IF 

CLAIMANTS . -. ---- (2) 

no 

8Q1 

b3"3 

1 ".),q3~ 

b27 

131 q 

lbb? 

125LI 

1702 

24,7b2 

t S,77 0 

1J o,5 32 

TABLf: v.:1 

Pl.~ s 8Y l t.J DUSTRV i'JF eMPL VE~ , 1974 

--. . -. . . -. . . ---. . . . . . ----. - . .. PLA!\IS wITH LOSSES ---- . . . . -. . . -. . --. . . -. NUM11ER OF Nll MHE ~ OF I NO, OF" CLAl"'A "1 TS(5} ~UMAf R "' IJ MHER CLAIMANTS CLA! TS(;)I fl I TH LOSSf S AS x 

LJF OF-. VIIT~ AS Pt.RCE:. NT I UF Sud TUT AL DF PL4tvS CLAIMANTS LOSSES uF Sl! 8T OTAL I CLMTS, W/LO~sEs 

-. . . - -. . --. -- p 

--. -.. ( 3) (U) - (5) , _,) (7) 

] [ IJ7 3 IJ 1 7 3 I (J X 4.~x 

.21 

8LI 77 3,6 ,8 

H 371 ~BO 2.0 2.8 

13i, 7b78 e,75q t->U 1 LI bB.3 

J q 2Ll8 201.i 2.5 2.1 

uq 1:17 0 b27 5,3 b,l 

c;2 1JLl7 381 b,1 3,Q 

'31 511' i.ibO s.1 u,7 

"'2 q~7 b84 I) I q b,Q 

Ll02 1 1,1.1 IJ I) qa1:3q 1 iJ (). 0 too.a _ 

, Q'4 AOOt bb18 I 0 I 0 

5% 1 q,41J7 1~'501 • 0 IQ 

~;;j~;-~;·;:;·;;~;;;;~;-~;·;~~-;~~:;~;;·-------····--------··-·--·-·---------·--------------------------------------~;-i976 __ _ QFFICf. OF TAX ALYSIS 

w 

00 
- 39 -

the same time, the great majority of claimants with losses, ineluding high-priority claimants, are in plans of employers whose 

net worth substantially exceeds benefit losses. This is an interesting fact in view of the decision in the pension reform 

legislation to impose partial liability on the employer for 

benefit losses at plan termination. However, caution should be 

exercised in evaluating net worth statistics. Net worth of an 

employer may consist, in large part, of fixed assets that have a 

high book value, and a high value to the particular firm as a 

going concern. But potential market value may be very low; this is 

an important consideration since liquidation of the employer 

organization and closure of a plant, division, or a subsidiary of 

a firm were relatively conunon reasons for plan termination. 

Employer income and net worth information is available for 

only 949 plans with about 26,700 claimants. The first part of 

Table V-2 presents the income and net worth information available 

for all 949 plans. About 17,400 claimants in 613 plans were associated with employers showing income on their most recently available 

tax return.l/ Of the 514 plans without benefit 19sses, 336 were 

associated with profitable employers. Of the 435 . plans with losses, 

277 were associated with profitable employers, but in only 179 plans 

were employer profits greater than benefit losses. 

ll Employer income before tax. Income refers to taxable income of corporate employers before net operating loss deduction and special deductions (line 28 of Form 1120, U.S. Corporate Income Tax Return). In 

addition, there were a number of non-corporate tax returns. In most 

cases, returns were available for the year of termination or the year 

preceding termination. 
- -. --- -

TAbU:.V-2 

CFLATJ[l~SHI~ 0F EMUL0YER I~c ~E. AND ~ET ~oRT~ TU ACC~U~D BENEFITS 

A• .. o A~J .iu s OJSTQ!guTEI) I "-' TE~Ml~HTED PE.l\.SlON PLANS, 'Q74 

- w - - - - - - - - - • • - • - • - - - - - - - - • - - • - • • - • • • - • • - - - • - . . -. . . . - . . I 'J d ..... R t i" I '\I I l " f.; t R I PI< f S p ; T 'I A L U E I 11 " f"J I J r-.1 T I PL A N S l IT 1-1 I E "1 PL 0 V E R I PL A N S w t1 E. ~ E PL A NS w 1-i E ~ E 

I ~~ I n~ I OF ACC~UE.D IST~JA TEnl POSITIVE INET WORTH! INCOME E~CEEDS NET WORTH EXCEEDS C.ATfi;· ~'f ·lF PLA l\J I u1 H ·SI CL""TSIAE. "; t.FlTS PE:R PE.~ IEMPLO,VER lNCOt..1EI PER I BENEFIT LOSSES BENEFIT LDSSfS 

-- - -- -- -. - -

ALL PLAt<JS 

P L A l\J S ,, I T H ~ rJ L (JS SE S 

PLA~S ~ITH LOS SES 

PLANS ~ITH Q LOSStS 

PLANS wITH LOSSES 

ALL PLANS 

PLA~S ~ITH NO LOSSES 

PL~NS wITH LOSSES 

H1 

U1 

I I CLAl"IA\JT CUI L~t\:T PW. nF l"JO. OF I CLAl"IANTI r.Jl.JMRER QF I r-.11JM BER Ofl NUMBE.R OFI NUMBER Of 

I I PLANS I CLMTS I I PLANS I CLAIMANTS! PL•NS I CLUMANTS 

2b,bU 3 $ 

15370 $ 

8535 

bA3S 

l t 273 $ 

5831 

5401 

5538 

~255 

C:,7Q8 

5572 

5481 

4289 

(5) 

ALL f MPLOYE.RS 

4HO b13 

Hb 

277 

. -- (b) (7) 

... ,, ... ' '.,."' 

t 7,3bc $ b 7 !J,5bo 

8873 

So 3

1

340 

863,515 

~~PLOVERS wIT~OUT CO~SOLIDATED R~TUR~S 

5864 

3836 

SS& 

308 

248 

0029 

4550 

E~~LOVERS WITH CONSDLIOATEO RETURNS 

$ 455b S7 0787 S10i?J3753 

u323 

5q 1,5l1 

l,IJ 3b,80b 

.. ,..., . .. .... (8) (10) ( t 1) 

o88A l 0,85 l 

b888 1 o,esi 

155 5112 

155 297 

J9 

24 5681 

··-·--···--·-------------------·-----·····--··-·-------------···-------·····························-····-············· -··········- OFFICE OF TM!: SECRETARY OF T"1E TREASURY May ·-· 1976 

OF~ ICE UF TAX A~ALYSIS 
- 41 -

Average employer net worth per claimant is about $674,566. 

Employer net worth per claimant was higher for plans with losses 

than for plans with no losses. For 336 of the 435 plans with losses, 

employer net worth exceeded the value of benefits lost. 

In most cases, income and net worth information was taken from 

a tax return filed by the specific employer associated with the 

terminated plan. But in some cases, a consolidated return was filed 

by a parent company that combined income and net worth data from 

all subsidiaries, rather than just the income and net worth 

attributable to the subsidiary with the terminated plan. 

Table V-2 does not relate employer income or net worth to 

claimants with losses. Claimant figures in the table are for 

total number of claimants ,in plans with losses, i .. e., they include 

claimants whose full benefits are being paid to them as well as 

those with losses. Thus, while ·the table indicates that several 

plans with losses were of employers with income and net worth 

greater than benefit losses, it does not show how many claimants 

with losses were accounted for by those plans. 

Relationship of Employer Income to Claimant Losses 

Table V-3 shows the relationship between employer income and 

claimant losses. The 410 plans for which income information is 

available account for 8,073 claimants with losses. The average 

dollar loss per claimant is $2,018. About 27 percent of all 

claimants with losses were in plans of unprofitable employers. 

About 59 percent of the claimants with losses were in plans where 

employer income equaled or exceeded benefit losses. 
T A~LE. V-3 

Pl ~ ' S ·• T T H l. ri 5 '3 r ~ ! '-' t l A T I n:... SI-' I ~ 1 • f: f:. HP l (J '( E. R I NC 1_ 11"' t. T ( 1 Cl A 1 MAN T L 0 $SE ~ 

J \i ut(· i.:LA'·S F" •W ~1-J!Cl-I f""IJU YE~ l "•CD"IE DATA v.. ~RE AVAILAtsLI:., 1974 

- . -. ----- -. - --- - -- . . - - --. -- - -. --. -- . . --- . . - - -. . . . . -. . . . . . . . . . . I ~UMBfR OF I N~MRE~ OF CLA!~ANTS H~ RATIO OF I ' . I I L ' RE ~ ri f' I L C's s p E Q IC L A l M A l\j T s ill IT ~ E t-4 p L 0 't' E R p., c 0 ME T 0 c l A I M A "' T L 0 s s E s I CLAT~A~lS 1 CLAlvANT l~ PRn~JTABL~ ~,~~~~~~~~~~5~0~X~~~,~~~1~0~0~X~~~,~~2~0~0~X~~~~~5~0~0~X~ 

1 , t T '"' L n s s ~ S 1 ( >- I T H L 8 S S ) 1 E , ... PL m E P s I u · D ER 5 o X 1 l'"' DE R 1 o o X I u t-.i o E:. R 2 o o X I u ND E R 5 o o X A ND o v ER 

- - . - -- - -- . - ( 1 ) (2) 

ALL CLAIMANTS ~ITH ~OS5ES Q()73 $ 2018 

CLA!~ANTS ~ITH LOSSES ~~O 233q 3025 

,.,E.RE VESTED, ELIGI8LE ~OR 

QETtRP1ENT1 O~ RET l'~tD 

PQJQ~ T0 TcRMINATJO~ 

E.to!PLC1YERS 

ALL CLAI"1ANTS WITH LOSSE.5 502LI s 25&3 

CLAIMANTS ~ITH LOSSES ~Hn 1075 Llqe,7 

WERE VESTED, ELIGIBLE FO~ 

QETIRE"1ENT, OR RETIRED 

PRIOR TO TERMINATION 

EMPL.OVE:qs 

ALL CLAIMANTS WIT~ ~OSSES 3ouq s 11 zo· 

.CLAIMANTS ~ITH LOSSES ~HO 12bU 1 370 

wE~E HSTED1 EL.IGI~LE !l't:'Q 

RETIRf"1ENT, OR RfTiqED ~QIO~ TO TE11MINATIIJlll 

(5) 

ALL Et-APLOYERS 

?155 ~20 827 

"3b bq lq 

W lTMOUT CONSOLIDATED RETURNS 

1b2b 31" 2b1 

338 &3 3q 

1t1ITH CONSOLIDATED RETURNS 

5zq 6 566 

qe b 0 

, 

. . . . -... . . . ( 7) 

205 57i 

31 

5'51 

71'1--8--~ 

11 21 

t----"-..! 1----1 

. -. . . . (8, 

1100 

Z078 

551 

1916 

·· 11"1 

···--··········-···················--··--·--·--···········-·············--·-···················~---·················· ·········· OFFICE. OF Tl-IF.. SECRETARY OF THF' TREASURY May : 1976- . . 

~FFICE OF TAX A~ALVSIS 

~U2 PLA~s ~ITH LQSSES HA D Nn DATA ON ~MPL YfR OMf 

37LI PL.A\S '!T'"41L)T cc11,5r1L!f) An i) RETlJ'ill.S 

3 l> PL A r-i S "' I T 1-- Co \l s n L I f' A T E f) '"' t T Lt "' :..· s 
- 43 -

Information was available for 2,339 claimants with losses who were 

either retired, eligible for retirement (early or normal), or 

had vested rights prior to termination.l/ Their average dollar 

loss is $3,023. About 19 percent of these high-priority claimants 

were in plans of unprofitable employers. 

Relationship of Employer Net Worth to Claimant Losses 

'!:_/ 

Table V-4 shows the relationship between employer net worth 

and claimant losses. Overall, only 7 percent of claimants with 

losses were in plans where employer net worth was less than the 

value of benefits lost while 77 percent of the claimants with 

losses were in plans where employer net worth was at least 1,000 

percent of claimant losses. A similar distribution prevails among 

high-priority claimants with losses. About 5 percent of the highpriority claimants with losses were in plans where employer net 

worth was less than 100 percent .of their losses while about 87 

percent of the high-priority claimants were in plans where employer 

net worth was at least 1,000 percent of their losses. However, 

as stated earlier, net worth of an employer as a going concern may 

be much higher than net worth computed as if the employer organization 

were to be liquidated and all assets sold. The data presented may, 

therefore, overstate the true net worth of employers that could be 

set against benefit losses. 

l/ These correspond to the first five claimant categories of earlier 

tables. 

~/ See Appendix B for revised Table 5-4 for the 1972 study. 
?L H.8 lllJTH L 

I "' "O 1 

TABLE Y-4 

f.L~TinJS~I? OF ~P OYF. ~ NET wQ RTM TO CLAIMANT L.OSS~S 

F1R MICH EM PLOV!R NE T ORTH DATA WERE AVAILABLE, 1Q1" 

. . . . .. -. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I I EMPLOYER NUMBER OF CLAIMANTS BV RATIO OF 

CL AIM ~T CA TE GO ~V 

. . . . - . . . . . . 

I llJU"48ER OF I L L1S PER I NET WQATM I EMPLOY!R NET WORTH TO CLAIMANT LOSSES 

I CLAIMANTS I CLA ANT IPER CLAIMANT I I 1001 I 26oi I sooi 

IWITM LOSSE S IC ~I ~ LOSS) ' ~IT~ LOSSES I UNO!R 100¥ I UNDER zoo• I UNDER 500, IUNO!R 1000X 1ono• 

ANO O\l!R . . . . (~) 

. . . . . . . . . . . ~ 5) . . . . . .. .• . . . . . . . . . • • 

AL L CL.At ANTS WITM LOSSES 7722 

CLAIMA NTS WITH LOSSES w~o 202 8 

WERE VE STED , ELIGIBLE ,OR 

RETIREM ENT, OQ RETIRED 

PRIOR TO TE~M {NATION 

ALL CLA I MANTS WITH LOSSES 46 7b 

CLAIMA NT WI TH LOSSES WHO 7&7 

WERE VES ED, EL IGIBL! 'OR RETI~EME NT , OR RETlR[O 

PRIOR TO TER MINATION 

AL~ CLAIMANTS WIJH ~OSSES 

CLAIMANTS ~ITH L.089[8 WHO 

W!RE VE STED, EL?QIBL! 'OR 

R!Tt EM EN T1 OR RET?R!O 

PRI OR.TO TERM I NATION 

J04ft 

1Z61 

2050 

1338 

son 

1212 

AL.L. !MPLOVEAS 

• 1,31'1,00'7 

l,'78 ~074 

55f> 

10] 

EMPLOY!RS WITHOUT CONIOL.IDAT!D RETURNS 

I ~1Jt,504 

e,t 3~6U 

526 

'7J 

!MP~OY!RS wITH CONSOL.IDAT!D R£TURNI 

I U~HO 

t,uo,u t • 

JO 

JO 

(bl 

u:s 

0 • 

0 ' 

P' 

JH 

u 

0 

(SJ 

H80 

!41 

••••• ••••••••• •••••••••••••••••••••••8 •••••••••••• •••••••••••••••••••••••••••••••••••••••••••••••• ••• •• •••••••~••~·••••• OF IC 0 TH CR!TARV 0' TH! TREASURY May 1976 . 0 ICE 0 TAX ANAL. V rs 

ANS wJTM ~OSS S MAO Nn DA TA ON PLOVER NE T woqT~ 

PLANS wITMOUT ~S LICA TE O RETUR 

PLANS IT C SOLIDAT!O RETURNS 
- 45 -

Terminated Plans with Loans to Employer or Investments in Employer 

Stock 

The survey found that few employers with terminated plans had 

loans outstanding from their plans at time of termination. Moreover, few plans had invested in employer stock. In about half the 

plans where there were loans to the employer or holdings of employer 

stock, claimants received full benefits. 

Table V-5 shows terminated plans with loans to the employer or 

holdings of employer stock by category of terminated plan and in 

relation to the total number of terminated plans. Of the 1,094 

plans for which information was available, 19 plans had only loans 

to the employer. while 22 plans had only employer stock. All such 

pla•s together accounted for 4,253 claimants, or 13 percent of all 

claimants in plans for which information was available. The . 18 

plans with losses contained 1,886 claimants, but not all these 

claimants experienced losses. Thus, the number of plans with em~ 

ployer loans and/or stock is very small and account for only a 

small number of claimants. 
TABL.E' V-5 

PLANS ~ITH LOANS TO EMPL~YER OR !~VESTMENT IN EMPLOYER STOCK 

JN 109~ TER~l~ATED ~LA~S REPQRllNG LOA'J AND lNVEST~ENT DATA• 1q74 

. . . - ---. . . . . . . . . . . . . . . . . . - . . . . -. -. . . . -. . . . . -. . -. . . . . . . . . . PLANS w·I TH LCH\IS PL.ANS WITH INVE.ST~ENTS IPL.ANS w ITi1 LOANS ANO INVESTMENT! 

. . - . -. . . . - . . . . . . . . . . . . . . . . . . . . . -. . . . . . . . . . • -. . TtJTALI TOTAL I t BENEFIT I I l~ENE.FlTIINVtST•I I BE.NErIT I L.OANS + 

CATEGORY riF "'0• I NO. I NO. I ;....o. I LOSS I LOANS I NO. I NO. I LOSS I ~ENT I ND. I NO. I LOSS I INVE.ST• 

TE~1"11NUEO OF I OF I OF I CJF I J:iER I PER I OF I OF I PER I PER I OF I Or I PER I MEN TS PER 

PLA~ I PLA'JSI CLMTS.I PLANS I cL~rs.1 CLMT. I CLMT.I PLANSICLMTS.t CL.MT. l CLMT. I PL.At-JS I CLMTS,t Cl.MT, ICLAlt-1ANT 

. - ---. -. --. . -·c1 r . -_<2> --. ~ ·~ - -- c5_~ -. -. ---. -. --.. . .... . . .... . . ~-... .. . - . . . ( 3) (4) (b) ( 7) '( 8) (Q) ·c 1 o > ( !_1) C12) :.C 13>' ( 1~l 

1 • ALL PLANS 1oq4 32q3o 1q 4cn s 1487 22 17"& 1 '' $ 40"" I* 21 s 1000 

2. PLANS WITH 

NO LOSSES 57b 1b,b80 7 91) 3312 1b 21?71 b050 0 0 0 

3, PLANS wHERE. 

BENEFIT SITU• 

AT IONS UNKNQwN b 314 0 0 0 0 0 0 0 0 0 ~ 

°' 

". PLANS wITH 

LOSSES 512 1 s,Q"2 12 3qe, s · 1 eso 1045 b 1490 s 2371 985 '* 21 $ 15bb 1000 

s. PLANS wITM L.OSSES 

AMONG VESTED 

PA.RTICIPANTS eq 584q * lo 88b 2nq 0 0 0 0 0 0 0 0 

b, PL.ANS WITH LOSSES AMQ~G PARTlCIPA~TS 

ELIGIBL.E FOR. EARLY 

OR NORMAL RETIREMENT 124 5q53 3 182 211n 9b'7 *· 1030 10'19 1302 ... 21 156b 1000 

- 7. PLANS WITH LOSSES 

Ar-tQNG RETIREE.S us "277 • t5q 3'04b 295 '* 85b 1051 156~ 0 0 0 0 

220 PLAl\IS wITl-4 NO LOAN ANO INV!STME-NT DATA 

··--·--···---·-·-··-············-·············-·---------------···········-------·-·······················-···-············--···· 

OFFICE OF T!-iE SECRETARY OF TH~ TREASURY :r:.,• May 1976" 

OFFICE OF TAX A"iALYSIS 

* Less than 3 plans 
- 47 -

VI 

Multiemployer Pension Plaps Under Collective Bargaining, 1965-1973 

This study of terminated jointly administered multiemployer pension 

plans under collective bargaining covers all such plans on file with the 

Department of Labor pursuant to the Welfare and Pension Plans Disclosure 

Act (WPPDA) which notified the Department as having terminated from 1965 

through 1973 .. !/There were 121 such plans, covering about 127,000 participants. These plans represent only about 6 percent of the approximately 

2,000 multiemployer pension plans on file with the Department of Labor 

in 1971, and account for only about 1.5 percent of the 7.5 million 

participants covered by all such multiemployer pension plans. 

A total of 115 of the terminated plans, covering 125,346 participants, 

responded to mail surveys conducted by the Department of Labor in 1972 and 

1974. These 115 plans represent 95 percent of the 121 terminated plans, 

and account for 99 percent of the participants covered by all such plans. 

Characteristics 2/ 

Size. The terminated multiemployer pension plans are, on the average, 

much smaller than all multiemployer pension plans. The 115 terminated 

plans responding in the surveys had a median~ size of about 350 partici1/ This report presents the combined results of 2 Department of Labor 

studies of terminated jointly administered multiemployer pension plans under 

collective bargaining. The first study, which was conducted in 1972, covered 

all plans which had terminated from 1965 through 1971, according to reports 

on file with the Department at that time. The results of this study are presented in chapter 6 of the U.S. Department of the Treasury and Department of 

Labor, Study of Pension Plan Terminations, 1972, August 1973. The second 

study, which was conducted in 1974, covered all plans which had terminated in 

1972 and 1973, according to reports filed with the Department, and plans which 

had terminated during the 1965-1971 period but which had not been included in 

the earlier study for a variety of reasons, foremost of which was the tardiness 

of plan administrators in notifying the Department that the plan had terminated. 

'!:_/See tablesv1-1.andv1-2for complete details on characteristics. 
- 48 -

pants, as compared to a median size of just under 800 participants 

for all multiemployer pension plans in 1971. Sixty-three percent of 

the 115 terminated plans covered fewer than 500 participants; just 

under 20 percent covered fewer than 100 participants--all but 1 of 

these plans covered over 20 participants. However, only 12 percent 

of all participants in the terminated plans were in those covering 

fewer than 500 participants. In contrast, plans covering 1,000 or 

more participants accounted for 79 percent of all participants in the 

terminated plans, but only 21 percent of the plans. 

Freguency of Terminations. Seventy-six percent of the 115 terminated 

plans, covering 72 percent of the participants, terminated prior to 1971. 

The largest number of terminations occurred in 1967 (19 plans); the 

smallest number occurre·d in 1973 (6 plans). 

Reason for Termination. Ove~all, 101 or 88 percent of the 115 plans 

terminated because of merger into another plan. These 101 plans covered 

98 percent of all participants. Only three plans terminated because of 

financial insolvency. 

Plans which terminated because of merger into another plan were, on 

the average, much larger than plans which terminated for other reasons 

a median size of 400 participants as compared to a median size of 100 

participants. 

Industry. The industry distribution of the 115 terminated plans 

differs a great deal from that of all multiemployer pension plans. Manufacturing accounted for 20 percent of all multiemployer plans and 27 

percent of the total coverage of such plans; however, of the terminated 
- 49 -

plans, this industry accounted for 37 percent of the plans and 45 percent 

of all participants. A total of 52 percent of all multiemployer plans, 

covering 32 percent of all participants, were in construction, as contrasted to 38 percent of the terminated plans, and 29 percent of the 

participants. 

Age. The median age of the 115 plans at time of termination was 

about 8 years. Seventy-nine percent of the plans, covering 88 percent 

of all participants, had been in existence for at least 5 years at time 

of termination, while 21 percent of the plans, covering only 12 percent 

of all participants, had been in existence for a lesser period of 

time. 

Medium of Funding. Seventy-two of the 115 terminated plans paid 

benefits directly from a self-insured trust fund. A total of 41 of the 

plans funded benefits exclusively through an insurance carrier--in all 

but one case from funds held by the carrier in a deposib administration 

ac count. Plans which provided benefits from a self-insured trust fund 

covered three-fourths of the participants of the terminated plans and 

were, on the average, much larger than insured plans. 

The proportion of pension plans which provided benefits through an 

insurance carrier is higher for the 115 terminated plans than for all 

multiemployer pension plans in 1971--36 percent as compared to 29 percent; such insured plans also covered a higher proportion of the participants of the terminated plans than of all plans in 1971--25 percent as 

compared to 16 percent. 
- 50 -

Extent of Benefit Losses 

There was a low incidence of benefit losses in the 115 terminated 

multiemployer pension plans. Of these plans, there were only 8 plans 

in which participants lost benefits; there were no benefit losses in 

107 of the plans. 

A total of 1,391 participants lost benefits in the 8 plans with 

losses. (See table VI-3) These 1,391 participants account for about one 

percent of the total coverage of all 115 terminated plans, and less than 

two-hundredths of one percent of the total coverage of all multiemployer 

pension plans. Of the participants with losses, 51 percent were retired, 

current employees eligible for normal or early retirement, current 

employees with fullyvested benefits, or past employees with vested 

benefits. 

Although there was a low incidence of benefit losses for all plans, 

in those plans in which benefit losses did occur, participants who lost 

benefits lost most of their accrued benefits. Of the participants with 

losses, 84 percent lost at least 50 percent but less than 100 percent of the 

present value of their accrued benefits, while 12 percent lost all accrued 

benefits. This latter group was composed entirely of active participants 

without fully vested benefits prior to termination. 

Plans with Losses. The 8 terminated plans with losses, which are 

discussed in detail below, were relatively smaller in terms of coverage 

than all terminated plans. Four of the 8 plans covered fewer than 

100 participants; the largest plan covered 623 participants. Among the 

plans with losses, the most prevalent reasons for termination were financial 
-

- 51 -

insolvency (3 plans) and employers required to contribute to another 

plan (2 plans); only 1 of the plans terminated because of merger into 

another plan. Five of the 8 plans had been in existence for at least 

5 years at termination, while 3 had been in existence for a lesser 

period of time. With respect to industry, 4 of the plans were in 

construction, 3 were in manufacturing, and 1 was in services. As to 

medium of funding, 5 of the plans provided benefits through a selfinsured trust fund, while 3 utilized a deposit administration contract. 

Plan 1 was a self-insured construction industry plan which 

terminated because participants were dissatisfied with it. The plan, which 

had been in existence for less than 3 years, covered 306 participants, 

all of whom were active employees with fully vested benefits. At 

termination, the average present value of the accrued benefits of 

these 306 participants was $4,150, and the amount allocated per parj 

ticipant was $220. Thus, in this plan, participants lost an average 

of $3,930 or 95 percent of the present value of their accrued benefits. 

Plan 2 was a self-insured construction industry plan which 

terminated because of financial insolvency. At time of termination, 

the plan had been in existence for 9 years, and it covered 132 participants-8Qretirees and 52 active employees without fully vested 

benefits. The 80 retirees lost an average of $1,679 or 89 percent 

of the present value of their accrued benefits, while the 52 active 

employees lost 100 percent of the present value of their accrued 

benefits. 

I 

I 

I 

I 

' 
- 52 -

Plan 3 lv'as a self-insured manufacturing industry plan which 

terminated because the employers were required to contribute to 

another plan. This plan, which had been in existence for 5 years, 

was the largest of the 8 plans, covering 623 participants. As the 

following distribution shows there were extensive losses for each 

category of participant, with retirees incurring the heaviest losses. 

Category of participant 

Number of 

participants 

Retirees and beneficiaries 

Active participants eligible 

for normal retirement 

Active participants eligible 

for early retirement 

Former employees with vested 

benefits 

All other active participants 

98 

33 

112 

9 

371 

Percent of 

present value 

of benefits lost 

92 

85 

83 

70 

75 

Plan 4 was a construction industry plan, insured through a 

deposit administration contract, which terminated after it had been 

in existence for 4 years. No reason was reported for termination; 

however, subsequent to termination, this plan was taken over for 

liquidation by the New York State Insurance Department. At termination, the plan covered 157 participants-15 retirees and 142 active 

employees without fully vested benefits. The present value of benefits 

and amourit allocated by category of participant for this plan are unknown; however, data are available on the total amount of the present 

value of benefits and the total amount allocated. At termination, the 

total amount of the present value of benefits was about $94,000--.abaut 

$600 per participant-and the total amount allocated was about $18,000--
- 53 -

about $115 per participant. Thus, participants in this plan lost an 

average of about 80 percent of the present value of their accrued benefits. 

Plan 5 was a service industry plan, insured . through a deposit 

administration contract, which terminated because employers were required 

to contribute to another plan. At termination, the plan had been in 

existence for 4 years, and it covered 85 participants. Of this number, 

8 were retirees, 6 were active employees eligible for normal retirement, 

and 71 were active employees without fully vested benefits. The plan 

purchased full annuities for the 8 retirees, and allocated the remaining funds to the 6 active employees eligible for normal retirement. The 

amount allocated to the 6 employees eligible for normal retirement represented only 16 percent of the present value of their accrued benefits. 

Thus, these participants lost 84 percent of their accrued benefits. The 

71 active employees without fully vested benefit~ lost ioo percent of 

i. 

their benefits. 

Plan 6 . was a self-insured manufacturing industry plan which 

terminated because of financial insolvency after it had been in existence 

for over 10 years. This plan, which was taken over for liquidation by 

the New York State Insurance Department, covered 66 participants~40 

retirees and 26 active employees without fully vested benefits. The 

40 retirees incurred slight losses-anaverage of about . 8 percent of 

the present value of their accrued benefits. The 26 active employees, 

in contrast, lost 100 percent of their benefits. 

Plan 7, like plan 6, was a self-insured manufacturing industry plan 

which terminated because of financial insolvency after it had been in 

f, 

I 

I 
- 54 -

existence for over 10 years. This plan, which was also taken over for 

liquidation by the New York State Insurance Department, covered 68 

participants-45 retirees and 23 active employees withou~ fully vested 

benefits. The 45 retirees received the full present value of their 

accrued benefits, but the 23 active employees lost 100 percent of their 

benefits. 

Plan 8 was a construction industry plan, financed through a deposit 

administration contract, which terminated because of merger into another 

plan. This plan, which had been in existence for over 10 years, covered 

68 participants. Of these ·participants, 7 were retired, 7 were former 

employees with vested benefits, 33 were active employees with fully 

vested benefits, and 21 were active employees without fully vested 

benefits. The only participants who suffered any losses in this plan 

were the 7 former employees with vested benefits. These participants 

lost 25 percent of the present value of their accrued benefits. 
- 55 -

Table VI-1. Selected Characteristics of Terminated Jointly 

Administered Multiemployer Pension Plans under 

Collective Bargaining, 1965-1973 

Characteristic 

Number of participants 

Total--------------

Not reported------------

Less than 100-----------

100-499-----------------

500-999-----------------

1, 000 and over----------

Year of termination 

Number 

115 

3 

20 

53 

15 

24 

Plans 

Percent 

100 

3 

17 

46 

13 

21 

Participants 

Number 

125,346 

1,180 

13' 779 

10,809 

99,578 

Percent 

100 

1 

11 

9 

79 

Total-- - - - - - - - - - - - - l==l:l:5::=:~~::::::1:::0:::0==1:::::::1:::2:::5::::.::::3::::4:::6 ::::i:=::::l::::OO:::::= 

1965--------------------

1966--------------------

1967--------------------

1968--------------------

1969--------------------

1970--------------------

1971--------------------

1972--------------------

1973--------------------

Reason for termination 

Total--------------

Merger into another 

plan------------------

Dissolution of employer 

association-----------

Employers required to 

contribute to another 

plan------------------

Plan financially insolvent---------------

Participants dissatisfied with plan--------

Unknown-----------------

9 

10 

19 

18 

15 

16 

15 

7 

6 

115 

101 

4 

4 

3 

1 

2 

8 

9 

16 

16 

13 

14 

13 

6 

5 

100 

88 

3 

3 

3 

1 

2 

19,819 

2,733 

11, 853 

21,608 

25,573 

9,465 

23,361, 

4,337 

6,597 

125.346 

122,845 

254 

1, 407 

266 

306 

268 

16 

2 

9 

17 

20 

8 

19 

3 

5 

100 

98 

1/ 

1 

.Y 

1/ 

I; 

Continued on next page 
- 56 -

Table VI-1. Selected Characteristics nf Terminated Jointly 

Administered Multiemployer Pension Plans under· 

Collective Bargaining, 1965-1973 

Characteristic 

Industry 

Total--------------

Manufacturing-----------

Construction------------

Wholesale and retail 

trade-----------------

All other---------------

Age at termination 

Total--------------

Less than 3 years-------

3 years but less than 5-

5 years but less than 10 

10 years or more--------

Medium of funding 

I 

- Continued -

Number 

115 

43 

44 

13 

15 

115 

10 

14 

54 

37 

Plans 

Percent 

100 

37 

38 

11 

13 

100 

9 

12 

47 

32 

Participants 

Number 

125,346 

55,884 

36,699 

24,348 

8, L~l5 

125,346 

12' 086 

3,236 

58,392 

51,632 

Percent 

100 

45 

29 

20 

7 

100 

10 

2 

47 

41 

To ta 1-- - - - - - - - - - - - - !==~l~lS===i===l~O~O===f=1=2:::5:·::3::::4::6=t:==l:::O::O== 

Self-insured------------

Insured through deposit 

administration contract-----------------

Split-funding-----------

Other insured-----------

No medium of funding 

selected--------------

72 

40 

1 

1 

1 

63 

35 

1 

1 

1 

94,162 

30' 714 

309 

161 

75 

24 

1/ 

II 

Note: Because of rounding, sums of individual percentages may not 

equal 100. 

Source: Information supplied by plans responding in the surveys, and 

reports filed with the Department of Labor pursuant to the Welfare 

and Pension Plans Disclosure Act. Data are for 115 of the 121 terminated plans surveyed, covering 125,346 of the 127,000 participants 

in the 121 plans. 

l -

1/ Less than one-half of one percent. May 1976 

Department of Labor 

Labor-Management 

Services Administrati1 ~ .... 
ab or 

nt 

rati, 

- 57 -

Table VI-2. Distribution of All Jointly Administered Multiemployer 

Pension Plans under Collective Bargaining, 1971 and Terminated 

Plans, 1965-1973, by Number of Participants, 

Industry and Medium of Funding 

All plans Terminated plans 

Percent Percent Percent Percent 

of of par ti- of of par tiplans cipants plans cipants 

Number of 12articiean ts 

Total--: ___________ ~ 100 100 100 100 

Not reported------------ - - 3 - Less than 500----------- 39 2 63 12 

500-999----------------- 19 3 13 9 

1,000 and over---------- 42 94 21 79 

Industrl 

. Total-------------- 100 100 100 100 

Manufacturing----------- 20 27 37 45 

Construction------------ 52 32 38 29 

Wholesale and retail 

trade----------------- 9 9 11 20 

All other--------------- 19 32 13 7 I 

Medium of funding 

Total-------------- 100 100 100 ' 100 

Self-insured------------ 67 78 63 75 

Insured----------------- 29 16 36 25 

Split-funding----------- - - 1 1/ 

Unknown----------------- 5 6 - - No medium of funding 

selected-------------- - - 1 -

Note: Because of rounding, sums of individual percentages may 

not equal 100. 

Source: Data on terminated plans are based on information supplied by plans responding in the surveys, and reports on file 

with the Department of Labor pursuant to the Welfare and Pension 

Plans Disclosure Act. Data on all plans are based on unpublished 

tabulations of the Department of Labor's Bureau of Labor Statistics. 

Data are for 115 of the 121 terminated plans surveyed, covering 

125,346 of the 127,000 participants in the 121 plans. 

ll Less than one-half of one percent. 

May 1976 

Department of Labor 

Labor-Management 

Services Administration 
Table VI-3. Number of Persons Lo~fng Benefits, and Extent of Losses in Terminated Multiemployer 

Pension Plans with Losses, by Category of Participant, 

1965-1973 

Extent of present value of benefit losses 

Category 

Total, plans with losses ll----

1. Retirees and beneficiaries-----

2. Active participants eligible 

for normal retirement--------

3. Active participants eligible 

for early retirement---------

4. Active participants with fully 

vested benefits--------------

5. Former employees with i 

vested benefits--------------: 

6. All other active participants--· 

Total number 

of claimants 

with losses 

Number 

1,391 

233 

39 

112 

306 

16 

685 

Percent 

100 

17 

3 

8 

22 

1 

49 

Number in category with losses of 

Less 

than 

50io 

47 

40 

7 

50 but 

less 

than 

lOOio 

1,172 

193 

39 

112 

306 

9 

513 

lOOio 

172 

172 

.!/Because of rounding, sums of percentages may not add to 100. 

ll There were 8 terminated multiemploy~r pension plans with losses. 

Percent in category with losses of 1 

Less 50 but 

than less 100% 

50io than 

lOOio 

3 84 12 

17 83 

100 

100 

100 

44 56 

75 25 

May 1976. Department of Labor 

Labor-Management 

Services Administration 

V1 

00 
- 59 -

Appendix A 

Brief E~planation of Termination Insurance Under ERISA 

Under the Employment Retirement Income Act of 1974, pension 

plans that are qualified are required to obtain plan termination 

insurance. The requirement applies to pension plans that affect 

interstate commerce. The requirement does not apply to money 

purchase, profit-sharing or stock bonus plans. The termination 

insurance program is administered by the Pension Benefit Guaranty 

Corporation tn the Department Qf Labor. ' 

The insurance program is financed by premituns paid by 

employers. Each plan must currently pay a premium of one dollar 

per participant for single-employer plans and fifty cents per 

participant for multi-employer plans. 

Unpaid vested pension benefits under the plan are covered by 

insurance payments to the partic.ipants and beneficiaries. The 

insurance payments are limited to the actuarial equivalent of the 

lesser of (a) 100 percent of average wages during the individual's 

highest paid five years of participation in the plan or (b) 

$750 per month. 

An employer who is financially insolvent must reimburse the 

PBGC for insurance payments it makes as a result of the termination 

of the employer's plan. The employer's liability is limited to 

30 percent of the employer's net worth. 
- 60 -

Appendix B 

Correction of the 1972 Treasury Study 

The following pages provide corrected data for Tables 4-6 and 

5-4 for the Study of Pension Plan Terminations, 1972. 
TABLE '4•b 

C~ANGES IN PLAN P•~TICIPATIO~ PRin~ TO TERMI~ATinN~ 1Q72

. . -. . . -. . . . . . - . . . . . . . . . . . . . . . - -- . - . . . . . . . -. . . . . 25% DECLI~E OR GREATtR 

. - -. - - - -. . . - - -

PLANS ~rr~ ~o l~S~ES 

PLANS ~IT~ L8SS~S 

•LL PLHIS PLANS wITM DECLINE 

. . . . . . -. . . . . . . . . . - . . . . -. . . -. . . . . . . . . . . ITOUI. ITOUL IPLAN! I 'OF IP~Tr:, I X QF !PLANS I 'IJF IP~TC, I 'OF IPLANS I 'OF IPRTC, I ~ riF 

!PLANS IPRTC, I I ALL I I ALL I I •LL I I ALL I I Al.L I I ALL 

I I I !PLANS I IPRTC, I IPLHIS 1 IPRTC, IPl.Al'llS I IPRTC, I 

. . . - . . . - . . . . r tl 

~n 2~1 o~ 

l.1~7 13,nP 

~l.lb J ll:i,t P. 3 

cni; 31,t t>5 

532 t'5,10Q 

1 (1CH 3Ulf'i 3 

~Qu 15,e73 

u 77 IP}) .H 

117#-1 3b,0bq 

,.. 2 7 1 b}11 0 

Cll 

t '52 

( 5) 

UR.~ 11/l?Q 

uq.e ti2lljt-

~ IJ • IJ 1 3/' l.

1 LI 

( b,. en 

, Qi.I 

217 

3q. •) 

u 0. 1 

uJ,7 

/.J 0. (} 

c ~) 

51.2 t~,b7'5 

'51 0 2 · A?Ut 

'5". t 1 o,1u o 

~ 1 • q , i>,31 8 

uc;.~ .>1_.ec;q 

~1.1.1 ~]Q? 

IJ 1. 0 t 1,~b8 

~1,7 i;lbt;O 

(10) ( 11> 

1.B 

/, 1 • 0 

11 3 

\ l.I t 

. . -. -. . . . . . . ( 12) c 13) 

35.~ 8200 

32.1 1~1~1 

32.1 l.IOlb 

-~1. ~ b072 

C 1 u) 

27. 0 

30.7 

11 t II 

·······-------·······--------·-·········-----···-····--·----·-··-···-···--···-··-···-------····--·---------------·-.·····-······ OFFICF ftF T~•E ~H~FTUIV OF Tl-IF TkFA~ JRY Rev. May 1976 

n~FTCE OF T4• ANALY~TS 

* Participant figures in the table are for the last year of plan operation. The sum of "plans with losses" and "plans with no losses" will not equal 

"all plans," due to a small number of plans not being inc luded where the benefit situation was unknown. 
PLA"iS ,o.JT~ LOSSFSI ~FL'TlrtNS..tIP 11 F ~~?LflVER NET w(JRTM Tfl CLAIMANT LOSSeS 

JN 258 PL•~s ~ ~HICH fMPLnVE~ ~ET 111QijT~ DATA ~ERE AVAILA~LE, 1972 

. . -. . -. . . . . . . . . . . . . . . . . - i;'MPLOVFP NU~~F~ OF rLAlMANTS AV ~ATlO UF 

I .... u•·H~ER (JF L'lSS PEI; "-ET ~f1PT... Er-IPLIJYE~ NE.T 1110RT ... TO CLAIMANT l.OSSES 

I CL•I~•~TS CL•I~•~T IPE.R CLAI~A~T 10~1 I 200X I soox 1onn\ 

lwITM L.nss~s l(wJTH l'1SSl I "'ITH Lri~SES I IJ~D F.:Q 100l I LJ~ OER 200X I UNOE~ 500, ll 1N OE.Cc 1000~ I A~ D 11VE~ 

-()). • <7). (a) 

ALL E.YPL OYERS 

'LL Cl.AI"4ANTS .-. IT"" LnS~F S IJQ5(,j s 11" 01 ~ 1~e,r;25 35e 1 IJ B e,qo "31 3,zq 

CLAIMANT~ w IT,., 1.os~Es .... ~( I 1 31 0 2b5"' ~2~f!?q 54 $11 105 112 Q58 

111F.RE VESTE.O, HIGI~L'- i;' '1R 

C:E TI R!MP• T, ()~ :::1 ~Tl~ EI.I 

PQ If'.'Q T'J T E Q "' I "" A T I J ·" 

E~PLOYE~~ ,,.zT'"'nuT C [• N ~ r1 L I 0 A 1 ED RE.TUf;rNS 

ALL CLAI~All;T~ "'IT"" L0SS~S ,nc; ~ ~'JD ,. Ae,287 ~e7 1 /J 1:3 515 wtS 2030 

CL.•t~ANTS 111ITH L!1SSE~ .-.Mn t 1 qq n,cn 1 5~,1 q a 51J ~ 1 10 r; t n2 ~s1 

•ERE VESHD, ELIGIEH.E ~OR 

Q E Tt RE~ E ~. T , nQ ~ETI~EI'.) 

PQJnA Tn T E' QM I "" ' T T ') ·~ 

f.MPL'1Yf?S "'I TM C n. ~, S C1 L ID A T E D RE TIJR!IJS 

ALL CLAIMA~T~ wITM 1.0SSES 111q ~ l 1 "El J c;1i;1

8H ~q 0 175 1 n ~qq 

CLAIMANTS •ITM l.O!SE~ w~o 1 l 1 2232 4Uqbq4f'I ., 0 (I 1 0 101 I J 

wEAE V!STEO, ELIGI8L! r:oR 

AETI!t£1'4ENT, 11A QP I ~~O 

PQIOA TO TE?~I!\JATtO~ 

a;;icE·~;·1~£-!Ec~E~~~;-~;·;:;·;~;~;~~;························································-····--·-··;e~~-;;;i976··········-

n,ncE OF TO ANALYSTS 

23b PL•~s ~ITM La~s~s ~An ~n nATA 'J~ EMPL~VER NET ~nRT~ 

23~ Pl.ANS wl'HJ•JT (r1~Sfll.Jl"ATFr• i;FTlJR~ s 

20 PLA~S .-.JTM 1~1S( LJl)AT~'r· IJFT ~n.s 

"' N