Watson Wyatt: PPA Effect on DB Closings Unclear

May 10, 2007 (PLANSPONSOR.com) - Following a new analysis of defined benefit plan sponsorship among Fortune 100 companies, experts at Watson Wyatt Worldwide say the effect of last year's pension reform law on DB plan sponsorship remains unclear.

A Watson Wyatt press release said the pace of change in DB sponsorship slowed somewhat last year and the number of companies offering so-called hybrid pensions held almost constant. The consulting firm’s analysis found 58 companies in the FORTUNE 100 sponsored defined benefit plans in 2006, down from 90 in 1985.

Of the 58 pension plans, 31 were traditional defined benefit plans and 27 were hybrids, which include cash balance plans, the press release said. Provisions of the Pension Protection Act of 2006 (PPA) prospectively affirmed the legality of hybrid plans.

“This year could be a turning point,” said Alan Glickstein, a senior retirement consultant at Watson Wyatt, in the press release. “Companies are trying to understand the new landscape. But in the long run, the new rules will provide a more supportive environment that may encourage companies to keep their traditional plans or adopt hybrid plans.”

Plans to close DB offerings have been announced by a number of companies in the past year (See Lincoln Financial Latest in DB Freeze Trend ).