Towers Watson: Retirement plan landscape stabilizing for Fortune 500 companies

While the 15-year trend of Fortune 500 companies moving away from defined benefit plans is continuing, the rate of transition is slowing down and the retirement plan landscape is stabilizing, said a report from Towers Watson.

At the end of 2013, a Towers Watson analysis found that only 118 Fortune 500 companies offered a DB plan to new hires, down from 299 companies in 1998. However, that number is only five fewer than the end of 2012 when there were 123 DB plans.

“If we just look at the number, there's still a move away from offering defined benefit plans within this group for newly hired salaried employees,” said Alan Glickstein, senior retirement consultant at Towers Watson, “so the focus is if you come aboard one of these companies today, what kind of retirement plans are we going to get?”

While the number of traditional defined benefit plans continues to drop, those companies that offer hybrid plans — most commonly cash balance plans — are sticking with them. At the end of 2013, 84 of the Fortune 500 companies offered hybrid plans, the same as the previous year.

“It's starting to show a more balanced picture between the merits of DB plus (defined contribution), and just DC,” Mr. Glickstein said. “In fact, many of the changes on the DC side are introducing features that are more DB-like,” such as target-date fund lineups.

Of the 76% of Fortune 500 plans that offered only a DC plan without an open DB plan of any kind in 2013, and that had made that transition since 1998, 51% froze their DB plan, 42% closed the DB plan to new hires and 7% partially froze the DB plan.