Those hardy employers that have kept their defined benefit (DB) pension plans open to new salaried employees seem intent on staying the course, as fewer of the biggest U.S. companies last year froze their DB plans in favor of offering only a 401(k)-style defined contribution (DC) plan to fresh hires.

A September 2014 report by Towers Watson, Retirement in Transition for the Fortune 500: 1998 500: 1998 to 2013, reveals that:

• Only 118 Fortune 500 companies (24 percent) offered any type of DB plan to new hires at the end of 2013, down from 299 companies (60 percent) 15 years ago.
• While the number of Fortune 500 companies with open DB plans reached a record low in 2013, the number of companies that moved away from DB plans last year (five) in favor of DC-only plans was the lowest number in more than 10 years.
• Nearly half of Fortune 500 companies that no longer provide DB benefits to new hires still have active employees who are accruing benefits.

Hybrids Claim Larger Share

While traditional pension plans have taken the hardest hit during the shift from DB to DC plans, hybrid pension plans have held relatively steady. Half of the employers that sponsored a DB plan maintained a hybrid plan—typically a cash balance plan—during that period. More than half (57 percent) of employers that established a hybrid plan either before or after 1998 still offered a hybrid plan to new hires in 2013.

Industry Sectors Differ

The analysis also found that certain sectors—utilities and insurance, for example—are retaining their pension plans. Among insurance companies, 66 percent offer both a pension and DC plan to new hires while 59 percent of utilities do so.

The insurance sector includes mutual insurance companies that are not publicly traded, and these companies face different external pressures and have different objectives from other industries. Additionally, utilities tend to have lower turnover and more long-term career workers than other sectors, the report notes.

In contrast, the high-tech, services and retail sectors have historically had low DB sponsorship rates, and DC plans are likely a better fit for their business needs. Overall DB plan sponsorship for these sectors never exceeded 36 percent.

Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller.

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