Many Companies Will Have Steep Rise In Defined-Benefit Pension Expenses
Many employers will have to spend huge sums this year to make up for investment losses in traditional defined-benefit pension plans, according to a new survey from the Chicago office of Deloitte & Touche L.L.P.
Executives at 40% of the 80 large and midsize companies that participated say their companies pension expenses will increase by more than 50% in 2003. Another 20% expect increases between 26% and 50%.
Sponsors of 12% of the participating defined-benefit plans have already decided to respond to the increases by making fundamental changes, such as shifts to entirely new types of plans.
David Hilko, Deloittes benefits practice leader in Chicago, says the massive pension funding shortfalls could hurt agents who sell group benefits.
“Companies are looking for ways to reduce the increased costs in benefits,” Hilko says. “You may see companies reducing health benefits to get the total cost of providing benefits more in line with how they want to pay.”