October 4, 2012 (PLANSPONSOR.com) – The number of Fortune 100 companies offering new salaried employees only a defined contribution (DC) plan rose in 2012, a Towers Watson survey found.
Less than one-third of these companies offer any defined benefit (DB) plan to newly hired salaried workers, and only 11 still offer a traditional DB plan to new hires.
Over the last 10 years, most employers have shifted from traditional DB plans to either account-based DB plans or DC plans. The shift is motivated by factors such as employers’ desire to reduce overall retirement costs, perceptions that workers prefer more portable plans, market trends and the belief that such a shift reduces financial risk, Towers Watson said.
Since 1998, employers have been steadily shifting their retirement offerings for newly hired salaried employees away from traditional DB plans. At the end of 1998, 90 Fortune 100 companies offered a DC plan and some type of DB benefit, either a traditional or hybrid (account-based pension, typically cash balance) plan. Today, only 30 companies on the Fortune 100 list offer a DB plan to their new salaried hires.
In 1985, 89 Fortune 100 companies offered a traditional DB benefit to newly hired salaried employees. Almost 30 years later, the pattern has flipped. Today, only 11 of these companies offer a traditional DB plan. In 1985, 10 of these companies offered a DC plan only; that number has steadily increased where today, 70 Fortune 100 companies offer this option.
More sponsors of active DB plans joined the Fortune 100 this year, replacing companies offering only a DC plan to new salaried hires. Of the six new companies this year, four are DB plan sponsors. Only one that fell off the list was a DB sponsor.
To view the full report, visit www.towerswatson.com/united-states/newsletters/insider/8067.