Employers appear to be trying to compensate for their flight from defined benefit pension plans by increasing support for 401(k) plans and other defined contribution retirement plans.
Researchers at the Employee Benefit Research Institute, Washington, and Mercer Human Resource Consulting, New York, have published data supporting that conclusion in an analysis of 162 employers that sponsor large U.S. defined benefit plans.
About 35% of defined benefit plan sponsors have made at least one major change, such as shutting out new employees or freezing the plan for all participants, in the past 2 years, and 33% that have not already made major changes said they are likely to make major changes in the next 2 years, the EBRI and Mercer researchers report.
About 78% of the pension plan sponsors that have closed their defined benefit plans to new hires in the last two years said they would increase employer contributions to the defined contribution plan.
The researchers also used a rating scale of 1 to 3 to study reasons why different types of employers changed their plans.
Concerns about an “overall benefit restructuring strategy” received a high, 2.8 rating from insurers but an impact rating of just 2.57 from banks.
Banks gave a 2.66 rating to worries about the effects of the Pension Protection Act of 2006, a new federal pension law, on defined benefit plan contribution requirements. Insurance industry employers assigned concerns about PPA contribution requirements an average impact rating of only 1.8.