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Survey Defined-Benefit Plans Still in the Retirement Mix

A new Watson Wyatt study finds a noticeable slowdown in large companies ditching their defined-benefit offerings. Hybrid plans are staging a minor comeback.

May 28, 2008
The largest of large American corporations are making fewer changes to their retirement plan offerings. And now it appears that the most dramatic change of all has run its course.

After a wave of companies earlier in the decade terminated their defined-benefit plans—or froze the plans to new hires—fewer businesses have been eliminating these traditional pension plans during the last two years.

According to a Watson Wyatt analysis of the retirement plans of the 100 largest U.S. corporations, more than half of the employers—54 to be exact—still offer defined-benefit plans to new employees.

Granted, that’s a sizable drop from the 90 that offered DB plans in 1998. Indeed, the total number of defined-benefit plans at the 100 largest companies declined by 30 percent from 2002 to 2006, a period marked by corporate concerns about administrative costs and the volatility of plan funding.

Yet the pace of change has slowed considerably of late. The number of defined-benefit plans sponsored by the 100 largest employers decreased by only 5 percent and 4 percent in 2006 and 2007, respectively, signaling that sizable changes in pension offerings in the private sector have stabilized.

Watson Wyatt’s research also revealed that the use of traditional pension plans may have waned, but hybrid defined-benefit plans have actually become more popular. In fact, only 28 of the 100 largest companies now make a traditional pension available to new hires, a nearly 60 percent drop since 1998. But 26 companies now offer hybrid plans, up from 22 a decade ago.

Filed by Mark Bruno of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.