Different Courses for Public, Private Sector Pension Freezes

In the April issue of “Program Perspectives”, the Bureau of Labor Statistics (BLS) notes that 20% of private industry workers and 79% of State and local government workers participated in a defined benefit retirement plan in March 2009. Of those that participated in defined benefit plans, 19% of private industry workers and 10% of State and local government workers were in frozen plans.

Frozen plans were generally less frequent among State and local government workers participating in defined-benefit plans. Only 10% of these participants were in frozen plans, with no difference between State government participants and those in local government. 

Among all private industry workers participating in defined-benefit plans, nonunion workers had a higher percent of participants in frozen plans (24%) than their union counterparts (10%).

The BLS report notes that the percent of participants in frozen defined-benefit plans differed among geographic regions; in the Pacific division, only 10% of defined-benefit plan participants were in frozen plans, compared with 26% in the East North Central.

For most private industry workers participating in frozen plans, their plan was closed within the last 2 to 5 years (61%), and another third were in plans that were closed more than five years ago (the rest were in programs that had closed in the last year.  In State and local government, nearly all of the frozen plans (94%) had been closed for more than five years.  Just 5% had been closed for 2-5 years, and the remaining 1% had been closed in the past year. 

Accrual Rates

Most private industry workers participating in frozen defined benefit plans were in plans in which all participants continued to accrue benefits (75%), while another 6% were in plans in which some, but not all, participants continued to do so.  The remaining 19% were in plans in which no participants continued to accrue benefits.  In contrast, virtually all state and local government workers in frozen plans were in plans that allowed participants to continue accruing benefits. 

When defined-benefit retirement plans are frozen, the vast majority of private industry participants (94%) had one or more alternative plans available, most commonly a defined contribution offering (56%).  Another 28% of these workers had enhanced existing defined contribution plans available. According to the BLS report, most of the remaining participants (11%) had a new defined-benefit plan, while 1% had other types of alternative plans available.

All State and local government workers in frozen plans had alternative plan options available.  However, unlike in private industry, the alternative is more likely to be a new defined-benefit plan—available to 95% of participants.

These results are from the Bureau of Labor Statistics National Compensation Survey: Employee Benefits in the United States, March 2009.  The report is available at http://www.bls.gov/ncs/ebs/benefits/2009/ebbl0044.pdf