The number of large employers that have frozen at least one of their defined-benefit pension plans continues to increase, according to a new survey.
Of the 624 employers on the 2008 Fortune 1000 list that sponsor defined-benefit plans, 27 percent have frozen at least one of those plans, according to benefit consultant Watson Wyatt Worldwide of Arlington, Virginia, which analyzed Securities & Exchange Commission filings. That’s up from 2007, when 21.6 percent of 638 Fortune 1000 companies had frozen at least one of their defined benefit plans.
In 2004, as the corporate drive to freeze defined-benefit plans was gathering steam, only 7.1 percent of 633 Fortune 1000 companies with defined-benefit plans had one or more frozen pension plans, according to the survey.
In a freeze, a company continues its pension plan, but future benefit accruals stop for some or all participants. Typically, employers who freeze their defined-benefit plans enhance their defined-contribution plans for affected participants.
Employers freezing their pension plans have done so for various reasons, including reducing retirement-plan costs and the volatility of required contributions, which for defined-benefit plans can fluctuate significantly due to changes in interest rates and investment results.
Fortune 1000 employers that have frozen defined-benefit plans in recent years include Hewlett-Packard Co., IBM Corp. and Sears Holdings Corp.
The survey is available at www.watsonwyatt.com.