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The nation's largest companies continue to move away from defined benefit pension plans in favor of 401(k) and other defined contribution plans, according to a survey released Thursday.
Last year, 58% of Fortune 100 companies offered a defined benefit plan to new salaried employees, down from 63% in 2005 and 74% in 2004, concludes the survey by Watson Wyatt Worldwide.
By plan type, traditional defined benefit plans posted the greatest decline. Last year, 31% of Fortune 100 companies offered a traditional plan to new employees, off from 35% in 2005 and 40% in 2004. In 1985, the overwhelming majority--89%--of Fortune 100 companies offered a traditional plan.
By contrast, big employers increasingly are offering only defined contribution plans. For example, just 10% of Fortune 100 companies offered only a defined contribution plan in 1985. Last year, 42% of the nation's corporate giants offered only defined contribution plans to new employees, up from 37% in 2005 and 26% in 2004.
Employers moving away from defined benefit plans often have said they did so out of concern about the volatility of contributions. The amount of required contributions can swing wildly due to fluctuations in interest rates and the equities markets.
Big employer sponsorship of hybrid plans--such as cash balance and pension equity plans, which have defined benefit and defined contribution plan elements but legally are defined benefit plans--also are declining, but at a much slower rate than traditional plans.
Last year, 27% of Fortune 100 companies offered a hybrid plan, down from 28% in 2005 and 34% in 2004.
As part of a comprehensive pension funding reform measure last year, Congress made clear that new cash balance plans would be protected from age discrimination suits, while most courts that have ruled on the issue in the past year have found existing plans to be not age discriminatory.