The biggest U.S. companies are continuing to move away from traditional pension plans, according to a new survey, and its authors said Congress should rewrite laws to help stop the trend.
As of April, more than one in 10 of the Fortune 1000 companies — 113 of them — had frozen or terminated at least one pension plan, or had announced plans to do so, Watson Wyatt Worldwide said in its survey. That compared with 71 companies in 2004 and 45 the year before.
Sylvester Schieber, director of U.S. benefits at the Arlington, Virginia, consulting firm, said employers were clearly struggling with pension plans, partly because of "decades of legal and regulatory uncertainty" around them.
He called on Congress to rework pension laws to help companies continue to sponsor such plans. The House and Senate have passed separate pension reform bills that congressional negotiators are trying to reconcile into a single measure.
“As Congress considers pension reform, it should be careful not to pass laws that make it even harder for companies to maintain their traditional pensions,” Schieber said.
Traditional pensions, known as defined benefit plans, pay retirees a monthly benefit. Nationwide, plan liabilities outpace assets by $450 billion, pension insurers estimate.
On Capitol Hill, House Majority Leader John Boehner said on Tuesday he hoped congressional negotiators could reach agreement on an overhaul of pension rules shortly but thought it was “doubtful” that the compromise bill would be brought to the floor of either chamber before a recess next week.
Boehner, an Ohio Republican, said some significant issues remained undecided, including proposals for special relief for struggling airlines with traditional pension plans. “There is no resolution of that (airline) issue,” he told reporters.
Watson Wyatt said 627 of the Fortune 1000 companies sponsor defined benefit plans. Employers are watching the pension talks to see whether they will have to contribute more to plans — and how predictable the costs will be year to year.
When pension plans are frozen, employees receive no new benefits from additional tenure or salary increases. When plans are terminated and assumed by insurers at the Pension Benefit Guaranty Corporation, participants receive reduced payouts.
Last week, Delta Air Lines Inc. said it would attempt to terminate its pilots’ pension plan as part of its bankruptcy restructuring.
Many employers are moving to 401(k) savings plans for workers, but Watson Wyatt warned this might not be a good way to keep workers or ensure they have enough retirement savings.
The number of companies that closed a plan to new hires or announced such an intention had risen to 49 as of April 2006, nearly double the number at the end of 2004. Schieber said those statistics are “particularly discouraging” as they indicate a trend for future generations of workers.