More than two-thirds of U.S. corporations that offer a defined benefit plan to new employees say they are committed to continue offering the plan to new hires, according to a survey from Towers Watson.
Of the 424 midsize and large employers — based on the number of participants — with a defined benefit plan surveyed, 36% offer DB plans to new employees. Of that total, 68% responded they remained committed to new hires.
The survey, “Pensions in Transition; Retirement Plan Changes and Employer Motivations,” also reports that support for DB plans is strongest at companies with the most participants. In the largest 10th percentile, 45% offer their DB plan to new hires.
While the commitment to new hires isn't surprising to Alan Glickstein, senior retirement consultant at Towers Watson, it might seem so to others, he said.
“The actual story is a bit more varied than that. There (are) different answers for different employers. Some have moved away from pensions. Others are highly committed,” Mr. Glickstein said in a telephone interview.
Among defined benefit plans offered to new hires, 54% are hybrid plans such as cash balance.
“I do think we'll continue to see movement away from traditional pension (plans),” Mr. Glickstein said. “Death is sometimes more like evolution than an end, so what I think we're seeing is a transformation, and I think we've seen it for 10 to 15 years now,” he said.
Among companies that have converted to hybrid plans since 2000, 40.4% said their primary motivation was to reduce cost, with 29.8% citing a reduction in cost volatility.
Among the 245 companies that have moved to defined contribution plans only from a DB plan, 64.5% have closed their DB plan, 33.1% have terminated it, and the rest have frozen it.
The top two primary reasons for the move for those employers was a reduction in cost, at 44.9%, and a reduction in cost volatility, 39.9%.
The survey was conducted from October through December.