Employers Continue to Ditch DB Plans

Among the plan sponsors who closed their DB plans to new hires in the last two years, 78% said they would increase employer contributions to their 401(k) plan. For those who plan to close their DB plan in the next two years, 80.5% said they also would boost contributions to their 401(k)s.

The survey also found that 59% of sponsors who have closed their DB plan have adopted automatic enrollment in their 401(k) plans, while 42% have not. Of those sponsors who will close their plans to new hires in the next two years, 61% have adopted auto enrollment, compared to 39% who do not plan to close their plan in the next two years.

The EBRI also addressed how employee health and rettirement benefits impact the federal budget. For the next fiscal year (2008) all employee benefits-related tax expenditures ($328 billion) will account for 34.1% of the $961 billion tax expenditures in the President’s budget, EBRI states. (The concept of tax expenditures is a measure of federal tax revenue “lost” to the Treasury under preferential provisions in the tax code.) Tax-favored employment-based health insurance benefits will account for the largest tax expenditure in the budget ($160 billion, or 16.7% of the total amount), EBRI says. Employment-based retirement plans will make up $92 billion, or 9.6%, of the total amount and 28.2% of all employee benefits-related tax expenditures, it concludes.