United States Steel Corp.'s freezing of its defined benefit plan puts it on a path to ending a pioneering retirement program that led to a transformation of both employee benefits and investment management.
The freeze to the $6.3 billion pension plan, which was announced by Pittsburgh-based U.S. Steel on Aug. 21, comes as no surprise to consultants and academics. Corporations have been moving away from defined benefit plans for much of the 2000s.
The corporate embrace of defined benefit pensions has weakened for a number of reasons. Corporations faced pressure from a number of economic shifts, including funding demands from an almost steady drop in interest rates that raised the cost of pension liabilities; increasingly tougher funding rules under amendments to the Employee Retirement Income Security Act of 1974; economic shifts that weakened companies with large DB plans; and workforce trends encouraged more transitory employment less suitable to the longer-term basis of DB plans.
