Human Capital & Careers

Pensions Not Freezing Over

The percentage of frozen pension plans is declining, says a new study.
Marie LeoneJuly 23, 2007

Good news for employees with pension plans. Fewer companies are freezing defined benefit plans, signaling that management is committed to keeping pensions intact, according to a new survey from consultancy Watson Wyatt. That’s better news than expected, considering that companies are coming off of a record-breaking year when 42 large corporations with sponsored pension plans froze the benefit.

The research, which analyzed pension plans sponsored by Fortune 1000 companies, revealed that in 2007, only 4 percent of the 638 companies that have plans elected to freeze the benefit. That’s a drop from 2006, when 7 percent of the 627 companies with plans reported that pensions were frozen.

“Undoubtedly some companies will freeze their pension plans in the future, but it appears that trend has peaked,” said Kevin Wagner, a senior retirement consultant at Watson Wyatt. “With less regulatory uncertainty and funding volatility better under control, the environment is now a more positive one for pension plan sponsors.”

The consultancy defines a frozen plan as one that a company has closed to new hires and has stopped contributing additional benefits.

Watson Wyatt also took a closer look at 300 companies that have plan assets of more than $100 million, and found that 59 percent of the companies that allow new hires to participate have made a formal decision to keep the plans open. “While many companies are committed to keeping their pensions, they may not be committed to their current plan design,” Wagner suggested. “Options such as hybrid pension plans are likely to gain in popularity as companies consider different features for their plans.”

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