Administration June 1, 2005

Survey: 2003 Corporate DB Contributions Doubled over 2002

January 6, 2005 (PLANSPONSOR.com) - Corporate sponsors of large defined benefit pensions contributed $44 billion to those plans in 2003 according to a survey conducted by the Committee on Investment of Employee Benefit Assets (CIEBA).

Reported by

Fred Schneyer

According to a news release from CIEBA, an affiliate of the Association for Financial Professionals, the 2003 DB contributions represented more than double the contributions made in 2002 ($21 billion) and four times the average contribution for the previous four years.

The announcement said that for defined contribution plans, employer and employee contributions per active employee increased for the ninth consecutive year in 2003. The combined total per employee was $7,047 in 2003 compared to $6,600 in 2002. Meanwhile, both DB and DC plan assets increased from beginning year levels by 20% and 22% respectively. Improved market returns account for much of the increase, but DB assets were also boosted by high corporate contribution levels, according to the announcement.

Additional survey findings include:

Defined benefit plans continue to be the primary retirement plan type provided by CIEBA members. DB plans had 57% more assets, covered 78% more assets and paid out 71% more in benefits compared to DC plans.
Both DB and DC benefit payments represented 7% of year-end assets. Overall, DC plan benefit payments exceeded contributions for the ninth consecutive year.
DB plan assets were allocated 60% to equities, 29% to fixed income and 11% to other investments. DC plan assets were allocated 32% to diversified equity portfolios, 30% to employer stock, 27% to fixed income, 8% to balanced funds and 3% to other options and loans. Both DB and DC plan equity allocations increased from 2002, but DC plan allocations to employer stock remained the same.
Most DB plan assets (82%) were actively managed, compared to 51% for DC plans.

CIEBA represents the country’s largest retirement funds and its members manage more than $1.1 trillion. The survey assessed 103 corporate plan sponsors responsible for the management of $686 billion in pension assets and $436 billion DC plan assets. The plans in the survey cover 9.4 million DB plan participants and 5.3 million DC plan participants. Most CIEBA members (95% of those surveyed) sponsor both defined benefit and defined contribution plans. Eighty-three percent of the plan sponsors covered by the survey made a contribution to their defined benefit (DB) plan(s) in 2003.