Corporate defined benefit pensions may be coming off the
endangered species list.
Not that traditional lifetime pensions will once again be
the nations predominant type of corporate retirement
program; no one predicts that.
But a new survey from the New York-based consulting firm
Towers Watson shows clear signs that traditional pensions have
lost as much ground as theyre going to lose and are now
at a stable plateau. Of the employers that still enroll new
hires in some sort of defined benefit plan admittedly, a
minority of the respondents 68 percent said they had
made a formal decision to keep offering the plan
for the next two to three years.
Athough two or three years may not seem much of a
commitment, Mike Archer, a senior retirement consultant in
Towers Watsons Parsippany, N.J. office, points out that
the plans have already survived two recessions in the past
decade, as well as the general trend away from pensions.
If these companies havent closed or frozen them
after all that, and if the companies dont change them in
the next three years, I dont know what it would take to
change them, he says.
Arthur Noonan, a senior partner at another consulting firm,
Mercer, is more pessimistic in the short run but more
optimistic over the long. For the short term, he cites a survey
of some 200 companies that Mercer co-sponsored last fall, in
which around one-fifth of the respondents said they were
still looking at whether or not to freeze or amend their
plan. Over the next three to five years, however, he
continues, not only will companies stop freezing, but some will
even restore lost pension plans.
It takes a while for the change to occur, he
says. But eventually, employers are going to have to say,
If defined contributions doesnt work, I need enough
defined benefit features that I can achieve what defined
benefit plans were providing me in the past a reason for
employees to stay, and a message about when the time to leave
Today fewer than 31 percent of public- and private-sector
workers today rely on traditional pensions as their main source
of retirement income, down from nearly 57 percent in 1988,
according to the Employee Benefit Research Institute. In the
Towers Watson survey, only about one-third of the 424 large and
midsize companies polled last fall were enrolling new hires in