Most of Fortune 100 Continues to Back DB

May 22, 2008 ( - The pace of retirement plan changes among FORTUNE 100 companies is stabilizing, and most still offer defined benefit plans to their new employees, according to an analysis by Watson Wyatt Worldwide.

The analysis of retirement plan sponsorship among FORTUNE 100 companies found that more than half – 54 firms – offer a defined benefit (DB) pension plan to newly hired salaried workers.   The report notes that, following an 11% decline between 2004 and 2005, the number of FORTUNE 100 companies sponsoring pension plans decreased by 5% in 2006 and 4% in 2007.

The report also notes that the rate of change slowed after passage of the Pension Protection Act of 2006, which the authors say established a more supportive environment for both traditional and hybrid (e.g., cash balance) DB plans.    However, they also note that, with proposed hybrid plan regulations not final until 2009, it could take several years to see the full effect of these developments for DB plans.

“Thanks in large part to the pension reform legislation, the peak rate of replacing DB plans with defined contribution-only plans appears to be behind us,” said Alan Glickstein, a senior retirement consultant at Watson Wyatt. “In fact, as companies evaluate what the new rules mean for them, we could very well see a renewed commitment to hybrid and other DB plans.”

Hybrid Vehicles

Of the 54 DB pension plans sponsored by FORTUNE 100 companies, 28 are traditional plans and 26 are hybrid plans, such as cash balance plans. Most companies that sponsor a DB plan also offer their new employees a defined contribution (DC) plan, and 46 firms have moved to a DC-only approach.

“Companies are seeking innovative ways to reduce the risks and costs associated with their retirement plans while still providing attractive benefits,” said Kevin Wagner, a senior retirement consultant at Watson Wyatt. “For some employers, that will mean offering an enhanced DC-only plan. Others, however, might opt for hybrids, given the combination of reduced volatility for employers and secure, portable benefits for employees.”

Retirement Plans at FORTUNE 100 Companies

Type of Retirement Plan

align="center"> 1985

align="center"> 1998

align="center"> 2002

align="center"> 2004

align="center"> 2005

align="center"> 2006

align="center"> 2007

Defined Benefit

align="center"> 90

align="center"> 90

align="center"> 83

align="center"> 74

align="center"> 63

align="center"> 58

align="center"> 54


align="center"> 89

align="center"> 68

align="center"> 49

align="center"> 40

align="center"> 34

align="center"> 30

align="center"> 28


align="center"> 1

align="center"> 22

align="center"> 34

align="center"> 34

align="center"> 29

align="center"> 28

align="center"> 26

Defined Contribution Only

align="center"> 10

align="center"> 10

align="center"> 17

align="center"> 26

align="center"> 37

align="center"> 42

align="center"> 46