In a new analysis of the Fortune 100 companies, Towers Watson finds that the number offering new salaried employees only a 401(k) or other defined contribution retirement plan option continues to rise.
In data released this morning, the professional services firm says that only 30% of these large U.S. companies currently offer fresh hires a defined benefit pension plan.
Towers Watson reports that 70 companies of the Fortune 100 only now offer a DC plan to new recruits, compared to 67 at the end of 2011 and 63 the year before that. Eleven companies offer a traditional DB plan (down from 14 last year) and 19 (holding steady) provide a hybrid pension plan, such as cash balance.
The analysis further notes that 2012 has been less active than 2011 in terms of plan changes.
“The ongoing shift from DB to DC plans due to cost and cost volatility is helping to create a next generation of retirement-age workers who may not be able to afford to retire when they would ideally like to,” says Kevin Wagner, a senior retirement consultant at Towers Watson. “The trade-off of cost versus talent issues is very real and will, without question, affect workforce and productivity issues as the next generation of workers ages.”
In addition to cost management, the makeup of the Fortune 100 itself has pushed the shift. Thirty years ago, most of the group was in manufacturing, a bastion of traditional pensions. These companies have largely been replaced by high-tech firms, Towers Watson says, most of which have never offered DB plans. Fifteen of the 19 companies that currently sponsor a hybrid plan were also on the list in 1998.
“Interestingly, as this shift in retirement plans continues, other Towers Watson research showed that younger workers are finding DB and hybrid plans more appealing than DC plans,” says Alan Glickstein, also with Towers Watson. “At a time when workforce demographics are changing and employees are growing increasingly concerned about their retirement security, employers find themselves in a position of having to carefully evaluate which type of retirement plan makes the most sense for them and their employees.”
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