Shift away from pensions continues
Pensions and hybrids lose share among Fortune 100 company retirement plans, a new survey shows.
NEW YORK (CNNMoney.com) - The largest companies in the United States are continuing their shift away from traditional pensions toward 401(k) plans, according to an analysis of pension trends by Watson Wyatt, a human resources consulting firm.
The number of FORTUNE 100 companies offering pensions in 2005 has dropped to 37, from nearly 90 in 1985.
The number of companies analyzed offering only 401(k)s has risen from 10 to 36 during the same period. Those offering a hybrid of the two plans have diminished to 27 from a high of 33 in 2004.
Hybrids function like company-sponsored 401(k)s with no employee contribution. They are technically considered "defined benefit" plans like pensions and in fact are federally insured by the Pension Benefit Guaranty Corporation. But they accumulate benefits in a hypothetical account balance that is paid out in a lump sum and workers can cash them out upon leaving their company.
Hybrids were on the rise until 2002 when regulatory and legislative difficulties slowed their growth, according to the report.
"The defined benefit system finds itself at a very critical stage," said Sylvester J. Schieber, director of U.S. benefits consulting at Watson Wyatt. Schieber warned that companies "moving to only a defined contribution plan may make it harder to retain employees and ensure they have adequate retirement savings."
Some may profit from pension freezes.
Social Security, Medicare to run out sooner.