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When it comes to defined benefit pension plans, the biggest corporate trend has been the move of employers to freeze the plans, with participants no longer earning future benefits.
Indeed, in 2013, only 34% of Fortune 500 companies still offered a defined benefit plan to new employees, according to a Towers Watson & Co. survey.
Crawford & Co. was way ahead of its corporate peers in that trend, however. It froze its pension plan back in 2002 — a year in which nearly 60% of big firms still offered the plans to new employees.
While the decision was difficult, it also was a necessary and important one, said Bonnie C. Sawdey, Crawford's vice president of human resources.
Changing interest rates and investment results meant “(w)e never knew how much we would have to contribute, plus federal lawmakers were frequently changing funding requirements,” she said. Amid that uncertainty, Crawford's actuaries said, “The time might be right for you to think about this,” she recalled.
The decision to freeze the plan was not made lightly. “Crawford is a family-oriented culture, and we recognized the impact this decision could have on our people.” But, she added, “pension expense was increasing at an alarming and unsustainable rate.”
Crawford's move to curb that unpredictable expense was coupled with sweetening its 401(k) plan. “We believed this approach would allow us to contain pension expenses while continuing to provide retirement benefits to our employees,” Ms. Sawdey said.
At the time of the defined benefit plan freeze, Crawford added a feature to its 401(k) plan that would automatically make a contribution to employees' accounts even if the employee did not contribute to the plan. Since then, Crawford has made several changes to how it matches employees' 401(k) plan contributions. In 2015, the company plans to match 45 cents on every dollar employees contribute to the 401(k) plan, up to 6% of pay.
“Defined contribution plans are more flexible and portable, and allow employees to actively participate in the (funds') investment management,” Ms. Sawdey said.
When employers move to high-deductible consumer-driven health care plans, one risk is that employees — because they are footing more of the cost — will delay preventive services that could spot medical problems early, before they develop into conditions that are far more expensive to treat.