More and more pension plan sponsors are either closing their defined benefit pension plans to new hires or have frozen it to all participants because of the costs associated with new rules under the Pension Protection Act (PPA) and pending accounting rule changes under FAS 158, a new survey conducted by the Employee Benefit Research Institute (EBRI) and Mercer Human Resource Consulting has found.
Even as these sponsors are shutting the door on DB plans, however, they are increasing contributions to workers’ defined contribution or 401(k) plans, the survey reveals.
In the last two years, a little more than 35% of 162 plan sponsors polled said they had made at least one change to their DB plan, the survey says. The most frequent responses (25.3%) said they had closed the plan to new hires, while 12.9% said they had frozen the plan for all members.
Just over 33% of the respondents that hadn’t changed their DB plan in the last two years said they were likely to do so in the next two years, the survey says. The most common plan was to close the DB plan to new hires (19.0%), with 14.2% saying they planned to freeze their DB plans to all members.