DB Plans Have, Cover, Pay More: CIEBA of AFP

December 9, 2002 (PLANSPONSOR.com) - Among larger employers that offered both defined benefit and defined contribution plans, the former had 61% more assets, covered 74% more participants - and paid out 57% more in benefits, compared to the latter.

Those were the results of a survey of members conducted by the Committee on Investment of Employee Benefit Assets, an affiliate of the Association for Financial Professionals (CIEBA of AFP).   Nearly all (99%) of CIEBA’s members offer both DB and DC plans, while DB plans continue to represent the primary plan type.

Not surprisingly given the soft investment markets, year-end assets for both traditional pension plans and defined contribution plans fell 12% and 5%, respectively, compared with beginning year levels.   Defined benefit (DB) plans had 61% of their balances allocated to equities, while defined contribution (DC) plans had 64% in equity investments of all types, according to the report.

Active Orientations

Most DB plan assets (82%) were actively managed, while less than half (44%) of DC plan assets had active management. The percentage of assets managed internally was similar, for DB and DC plans, 17% and 15% respectively.

Both DB and DC plan benefit payments represented 7% of year-end assets, while for the seventh consecutive year defined contribution plan benefit payments exceeded contributions.   Still, DC plan contributions averaged more than $6,000 per active employee, with 30% provided in employer match.   DC plan participation held steady at 85% in 2001 and 2000.

Education Stations

Meanwhile, the percentage of plan sponsors using Web sites to communicate with plan participants increased significantly, from about two-thirds (66%) in 1999 to 96% last year year.

More than 80% of responding plan sponsors offered some type of investment education, while just 31% made individual financial planning available. Plan sponsors used interactive software advisory programs more often – 28% did so in 2001 compared to 21% the year before.

The survey included 100 corporate plan sponsors with $711 billion in pension assets and $441 billion in defined contribution plan assets. The plans in the survey cover 10.2 million participants in DB plans and 5.9 million in DC plans.

The Committee on Investment of Employee Benefit Assets, better known as CIEBA, is the voice of the Association for Financial Professionals (AFP) on employee benefit plan asset management and investment issues. CIEBA represents more than 120 of the country’s largest pension funds. CIEBA members manage more than $1.1 trillion of behalf of 16 million participants and beneficiaries.