The largest public companies continue to steadily replace defined benefit plans with defined contribution or hybrid plans for new salaried employees, according to a 25-year analysis of Fortune 100 companies by Towers Watson.
Fifty-eight of the Fortune 100 companies offered only DC plans to new salaried employees this year through May 12, according to a news release from the firm. This tally includes “changes made this year and announcements of future plan changes,” the news release said.
Five years ago, 37 offered only DC plans to new workers, while in 1985, 10 companies offered only DC plans to new employees.
Also, the total number of Fortune 100 companies offering DB plans (traditional or hybrid) to new salaried employees dropped to 42 this year from 90 in 1985, the news release said.
Towers Watson found that the number of Fortune 100 companies offering traditional pension plans to new salaried employees dropped sharply — to 17 this year from 89 in 1985, the news release said. However, the hybrids reached their peak at 34 in 2002 and in 2004; this year, 25 were hybrids, including cash balance plans.
“The movement toward account-based plans appears to be steady and strong as companies shift away from traditional pensions,” Kevin Wagner, senior retirement consultant at Towers Watson, said in the release. “And while most of the shifting has been toward 401(k) plans, we are seeing employer interest in cash balance plans, too, as the provisions of the Pension Protection Act, which creates a more friendly environment for these plans, begin to take effect.”
Towers Watson used internal surveys and information as well as public information sources — including proxies, 10-K filings and annual reports – to analyze corporate retirement plan trends from 1985 through May 12, Ed Emerman, a spokesman for Towers Watson, wrote in an e-mail response to questions.