Most Say They'll Keep Pensions Open to New Hires


By SHRM Online staff May 30, 2012

A significant number of U.S. employers that still offer defined benefit (DB) pension plans say they remain committed to providing those benefits to new salaried employees, according to a survey by consultancy Towers Watson.

The survey was conducted from October through December 2011 with responses from 424 mid-size and large U.S. employers that sponsor DB retirement plans. Among the findings reported in Pensions in Transition: Retirement Plan Changes and Employer Motivations:

Just over one-third (36 percent) of respondents offer a DB plan open to new employees.

Support for DB plans is strongest at large companies. Among the largest, 45 percent still offer a DB plan to new hires.

More than two-thirds (68 percent) of those that offer an open DB plan are committed to offering the plan to new hires over the next few years.

Only one-fourth of respondents with active DB plans are not firmly committed to keeping the plan open, and just 7 percent intend to close or freeze their plan over the next few years.

When asked why they are committed to offering a DB plan to new hires, 71 percent cited promoting employee attraction and retention as the key reason, followed by maintaining employee morale (50 percent).

Encouraging Sign

“Several factorsincluding low interest rates, falling equity values, a deep economic recession with uneven recovery, and regulatory and legislative uncertaintyhave made sponsoring DB plans less attractive to employers over the past decade,” said Alan Glickstein, a senior retirement consultant at Towers Watson. “Yet, despite a vastly changed landscape for retirement plans, the fact that many employers remain committed to DB plans is encouraging, especially since it is more difficult for employees to rely on a defined contribution plan as an effective stand-alone retirement plan.”

Additional Findings

Other findings from the survey:

Hybrid plans, primarily cash balance plans that combine features of 401(k) plans and traditional pension plans, are the most prevalent type of DB plan for new hires. More than half (54 percent) of DB plans were hybrid plans, while 46 percent were traditional plans.

Employees most value the guaranteed benefits that pensions provide, 78 percent of respondents that sponsor DB plans open to new hires said. Additional Towers Watson research shows that a growing number of employees are willing to pay more from each paycheck to ensure a guaranteed retirement benefit.

Related Articles:

Most Would Switch Jobs for a Better Retirement Plan, SHRM Online Benefits Discipline, May 2012

Funding Decisions Loom for Pension Plan Sponsors, SHRM Online Benefits Discipline, May 2012

Pension Funding Volatility Remains Top Priority, SHRM Online Benefits Discipline, February 2012

From Defined Benefit to Defined Contribution: A Systematic Approach to Transitioning Retirement Plans, SHRM Online Benefits Discipline, January 2012

Income-Replacement Goals Overlooked by Plan Sponsors, SHRM Online Benefits Discipline, January 2011

Americans Wish They Had a Pension, Would Consider Annuities, SHRM Online Benefits Discipline, August2010

SHRM Online Benefits Discipline

SHRM Online Retirement Plans Resource Page

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