Majority of Fortune 100 Companies Offer Only Defined Contribution Plans to New Salaried Employees, Watson Wyatt Analysis Finds
12 May 2009 - 2:48AM
PR Newswire (US)
Hybrid Pension (Cash Balance) Plans Become More Prevalent Than
Traditional Pension Plans for the First Time WASHINGTON, May 11
/PRNewswire-FirstCall/ -- For the first time, the majority of
Fortune 100 companies now offer new salaried employees only a
defined contribution (DC) plan, such as a 401(k), according to a
new analysis by Watson Wyatt, a leading global consulting firm. In
another first, more Fortune 100 companies offer hybrid pension
plans, such as account-based cash balance plans, rather than
traditional defined benefit (DB) plans. Today, 55 companies in the
Fortune 100 offer only DC plans to new hires, a jump from 46 at the
end of 2007. The most recent number includes four companies that
announced in 2009 they will switch from a DB to a DC-only plan.
Fortune 100 Companies Continue Shift to Only DC Plans * Type of
retirement plan 1985 1998 2002 2004 2005 2006 2007 2008 2009
Defined benefit 90 90 83 74 63 58 54 49 45 Traditional 89 67 49 40
34 30 28 24 22 Hybrid 1 23 34 34 29 28 26 25 23 Defined
contribution only 10 10 17 26 37 42 46 51 55 *Numbers indicate
plans offered to new salaried hires at the end of each year. The
"2009" column includes changes made this year and announcements of
future plan changes through May 8, 2009. "We're entering a new
world for retirement benefits," said Alan Glickstein, senior
retirement consultant at Watson Wyatt. "With many current and
especially older workers still covered by closed or frozen pension
plans, new and younger employees will be the first generation to
rely on 401(k) plans exclusively for their retirement savings. It's
a big burden for them to carry as recent events have made all too
clear." Among those companies still offering DB plans, 22 have
traditional plans and 23 offer hybrids such as cash balance plans.
Cash balance plans reduce volatility for employers while providing
more visible benefits for employees than traditional DB plans.
Participants in cash balance plans have continued to see their
pension accounts go up during the financial crisis in marked
contrast to most 401(k) accounts. "With the economic downturn and
full impact of legislative and regulatory changes such as the
Pension Protection Act still playing out, we can expect more plan
design changes on the horizon," said Kevin Wagner, senior
retirement consultant at Watson Wyatt. "The trend toward
account-based plans is likely to continue because of their
visibility and transparency. With the exposed weaknesses in 401(k)
plans and the ever-present need to manage the workforce, more
companies might opt to provide hybrid plans, now seen as a viable
alternative to offering only a DC plan. However, to reduce costs,
companies might instead continue cutting back on employer-sponsored
retirement benefits in general. The two paths will have
significant, yet very different, implications for the retirement of
millions of workers." About Watson Wyatt Watson Wyatt
(NYSE:WWNASDAQ:WW) is the trusted business partner to the world's
leading organizations on people and financial issues. The firm's
global services include: managing the cost and effectiveness of
employee benefit programs; developing attraction, retention and
reward strategies; advising pension plan sponsors and other
institutions on optimal investment strategies; providing strategic
and financial advice to insurance and financial services companies;
and delivering related technology, outsourcing and data services.
Watson Wyatt has 7,700 associates in 33 countries and is located on
the Web at http://www.watsonwyatt.com/. DATASOURCE: Watson Wyatt
CONTACT: Ed Emerman, +1-609-275-5162, for Watson Wyatt; or Steve
Arnoff of Watson Wyatt, +1-703-258-7634, Web Site:
http://www.watsonwyatt.com/
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