Nearly half of U.S. multinational corporations that expect to make changes to their defined benefit plans over the next 12 months are considering dropping their plans, according to a survey by PricewaterhouseCoopers. The survey, based on interviews with 147 CFOs and managing directors, found that 54% of companies with a defined benefit plan have recently changed it or are considering a change, driven mainly by cost of maintaining the plan and funding volatility.
"Volatility jumped out more than I expected," said Steve Metz, a principal in PricewaterhouseCoopers' human resources services group. "That resonated with me because the fact is that everybody who wants to change the rules for pension plans wants to increase cost volatility. They might not realize it, but that's where it's going."
The other top drivers of plan changes were accounting requirements, competitor actions and government regulations, according to the survey.
The survey also found that 67% of defined benefit plan sponsors that made changes over the past three years closed the plan to new hires, while 63% froze the plan entirely.
"The key is this: People who want to keep pension plans alive, like unions, some employers, etc. ... need to make sure they're heard" by regulators and legislators, Mr. Metz said. "Yes, it's important to re-examine the pension rules, but if the reaction is too strong, you take away virtually every tool the employer has to manage the pension plan."
