Finally get that promotion? Get exclusive content, tips and tools to help you excel.
Shawn Premer shows how doing the right thing for employees leads to positive business results.
Is your employee handbook keeping up with the changing world of work? With SHRM's Employee Handbook Builder get peace of mind that your handbook is up-to-date.
Build competencies, establish credibility and advance your career—while earning PDCs—at SHRM Seminars in 12 cities across the U.S. this spring.
#SHRM18 will expand your perspective – on your organization, on your career, and on the way you approach HR. Join us in Chicago June 17-20, 2018
Members may download one copy of our sample forms and templates for your personal use within your organization. Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organization’s culture, industry, and practices. Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRM’s permission. To request permission for specific items, click on the “reuse permissions” button on the page where you find the item.
The number of
Fortune 1000 firms that have a frozen pension plan increased again in 2009 as companies continue to look for ways to control their retirement benefit expenses, according to
an annual analysis by HR consultancy Watson Wyatt.
The analysis found that 190 firms on the 2009
Fortune 1000 list have a frozen defined benefit (DB) pension plan, compared with 169 companies in 2008 and only 45 in 2004. Overall, the rate of DB plan sponsorship in the
Fortune 1000 decreased slightly to 61 percent in 2009 from 63 percent in 2004.
The number of
Fortune 1000 DB plan sponsors with frozen plans has increased steadily since 2004:
Fortune 1000 list year
Number of DB sponsors
Number of DB sponsors with frozen plans
Percentage of DB plan sponsors with frozen plans
Source: Watson Wyatt.
The analysis found that industries with high DB plan sponsorship rates, such as utilities and manufacturing, are less likely to freeze a plan than those with lower sponsorship rates. However, companies in industries that have been affected severely by the economic crisis — the financial services and automobile industries in particular — are exceptions. Almost half of the DB plan sponsors in the financial services industry and one third of the DB plan sponsors in the automobile industry have frozen plans.
“As companies in industries that have suffered through the crisis struggle to keep their heads above water, freezing or closing pension plans may seem like effective ways to cut costs,” says Alan Glickstein, senior retirement consultant at Watson Wyatt. “However, this strategy could come with substantial hidden costs — for employers, who could face increased difficulties in managing the retirement of their workforces, and for employees, who could face reduced retirement resources as a result of a frozen pension plan or a reduced 401(k) match.”
Not Boost for Company Stock
A separate Watson Wyatt
analysis found that freezing pensions does not have a positive effect on companies’ market value. The analysis of 82 publicly traded companies that froze or closed their pension plans between 2003 and 2007 found that there is an insignificant or negative impact on stock prices associated with the announcement of a pension freeze or close.
Refuting conclusions of previous research, in 71 out of 82 cases the stock prices of companies did not change significantly in the 23 days around an announcement of retirement plan changes. In the cases where such an announcement did have a statistically significant effect, more often than not the employer’s stock price decreased.
“Freezing a plan may produce some accounting gains, but it will not provide companies with long-term cash flow relief (either absolute level or volatility) for many years,” says Mark Warshawsky, director of retirement research at Watson Wyatt. “Also, even if these freezes do lead to savings, there will be no immediate positive effect on firm value, which could even become diminished in the long run if employees begin to view the firm as an uncompetitive employer in light of its shrinking commitment to retirement and its transfer of risk to employees.”
Stephen Miller is an online editor/manager for SHRM.
Bond Markets Deal Fresh Blow to Underfunded Pensions, SHRM Online Benefits Discipline, July 2009
Milestone: Most Fortune 100 Firms Offer Only 401(k)s to Salaried New Hires, SHRM Online Benefits Discipline, May 2009
Rescuing Pension Plans, HR Magazine, May 2009
Retiring a Defined Benefit Plan: Freeze vs.
SHRM Online Benefits Discipline, July 2007
How to Weigh Alternatives for Defined Benefit Plans, SHRM Online Comp & Benefits Focus Area, April 2007
Pension Plans: Freeze 'Em and Forget 'Em Is Not a Practical Strategy, SHRM Online Comp & Benefits Focus Area, February 2006
Sign up for SHRM’s free
Compensation & Benefits e-newsletter
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Please sign in as a SHRM member before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
Join SHRM's exclusive peer-to-peer social network
SHRM’s HR Vendor Directory contains over 3,200 companies