The trend away from defined benefit pension plans continues, according to new research from Towers Watson. Their recent analysis of Fortune 100 companies found that the number replacing their traditional pension plans with account-based plans for their new employees is continuing to rise. Account-based plans, for purposes of the analysis, include defined contribution plans like 401(k)s and hybrid (cash balance) plans.
Fifty-eight percent of the Fortune 100 companies included in the analysis offer only a defined contribution plan to new hires, compared to 55% at the end of last year, and 51% at the end of 2008. The data revealed that three companies announced this year that they plan to switch from a hybrid plan to a defined contribution-only plan, and three others are switching from a traditional defined benefit plan to a hybrid plan. Seventeen of the companies included in the research continue to offer a defined benefit plan, down from 20 at the end of 2009 and 24 at the end of 2008.
“The movement toward account-based plans appears to be steady and strong, as companies shift away from traditional pensions,” said Kevin Wagner, senior retirement consultant at Towers Watson. “And while most of the shifting has been toward 401(k) plans, we are seeing employer interest in cash balance plans too, as the provisions of the Pension Protection Act, which creates a more friendly environment for these plans, begin to take effect.”
Alan Glickstein, senior retirement consultant at Towers Watson, adds, “Providing visible and adequate retirement benefits for their workers remains a high priority for large employers. As the economic climate improves, we fully expect to see the trend toward account-based plans to continue in the foreseeable future. Employers will be better positioned to take advantage of recent legislative and regulatory changes that make cash balance plans more appealing to them and to their employees.”
IRS Wants To Educate You Via Phone Forums
As another way to help employers and practitioners learn more about the administration of their retirement plans, the Internal Revenue Service offers a service called Phone Forums. You can access information and even handouts on a variety of employee plan topics on the Phone Forums - Employee Plans website.
Some of the topics covered in recent months include ESOP Plan Update, SEP Plan Pitfalls, and Retirement Plan Distributions. Transcripts of many of the past sessions are also available at the website.