401k

Defined-Benefit Plans Continue To Dwindle Among US Firms

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States and municipalities are steadily shifting away from defined-benefit plans and moving workers into 401(k)-style or hybrid plans. But the trend isn’t exclusive to the public sector; as a recent survey reveals, the shift is just as pronounced among the country’s largest private sector firms. Reported by Business Insurance:

Just 118, or about 24%, of Fortune 500 companies offered a defined benefit plan to new salaried employees in 2013, down from 123 in 2012 and a steep decline compared with the 277, or 55%, that offered the plans in 2003, according to a Towers Watson & Co. survey released Thursday.

Frequently cited reasons for the decline in employer sponsorship of defined benefit plans include longer employee lifespans, which increases benefit costs; decreased corporate tolerance of fluctuating contribution requirements, which can jump up and down due to investment results; and escalating Pension Benefit Guaranty Corp. insurance rates.

The switch from defined-benefit to defined-contribution shifts more risk onto workers. But 401(k)s carry risk for employers, too, according to Towers Watson.

Such a move “carries risks for employers, such as having workers delay retirement when market performance is poor, which in turn can result in higher benefit costs and less mobility within their organizations,” said Alan Glickstein, a senior retirement consultant at Towers Watson in Dallas, in a statement regarding the survey.

 

Photo by 401kcalculator.org

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