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Fortune 500 Undergoes Big Shifts in Plan Offerings

There has been a massive shift in the types of retirement plans offered by the Fortune 500 since 1998 — unless you’re talking about hybrid plans. A new report by Willis Towers Watson notes that approximately 90% of Fortune 500 employers that sponsored traditional DB plans in 1998 have changed the retirement benefit for new hires since then: 47% froze or closed their primary plan and transitioned to a DC-only environment for salaried new hires, and 43% amended the traditional DB plan to a hybrid DB design.

However, 30% of employers that offered hybrid plans to salaried new hires in 1998 were still offering them in 2015, and 58% of employers that converted their traditional DB plans to hybrids after 1997 still offered those programs to new hires, according to the report.

Shift Patterns

A third (34%) of companies sponsoring frozen DB plans had closed their plans at an earlier date before freezing them. Sixty companies have frozen their plans since 2010, and half had closed the plan at an earlier date. This pattern of first closing, then later freezing, has become more common over the past few years, according to the report: 26 companies have frozen their primary DB pension since 2013, and 65% of these plans were already closed before the freeze. As for the interval between closing and freezing for DB plans that followed the close-then-freeze pattern, the average interval was 4.5 years and the median was four years.

Of course, the shift in plan offerings is partly attributable to changes in the Fortune 500, as more employers joining the list over the years have never maintained a DB plan as a primary retirement vehicle. Slightly more than half (273) of the employers in this analysis were in the Fortune 500 back in 1998, and 24% of them offered only a DC plan to salaried workers at that time.

Traditional DB sponsors have been more likely to remain on the list: 19 of the 24 traditional DB sponsors in today’s Fortune 500 list were also on the list in 1998.

Twenty percent of Fortune 500 employers still offered a DB plan to salaried new hires in 2015, and nearly 70% of those employers offered a cash balance plan (the most common type of hybrid design). At 23%, traditional final average pay plans were the next most popular DB offering.

Other Findings


Among the other report findings:

  • In 2015, only 20% of Fortune 500 companies offered a DB plan (traditional or hybrid) to salaried new hires, down from 59% among the same employers back in 1998.
  • There has been an uptick in plan freezes and closings since the 2008 financial crisis. In 2009, 21% of these employers sponsored frozen pensions, and the same percentage had closed their primary DB plan to new entrants. By 2015, 39% of sponsors had frozen a DB plan, and 24% had stopped offering their primary DB plan to new hires.
  • The recent uptick in freezes has been among plans that were already closed to new hires.
  • Certain industry sectors, as well as employers whose pensions are relatively small (as compared with their market capitalization) and/or well-funded, are more likely to still offer a traditional DB plan to new hires.
  • When pension accruals in the primary DB plan end, most employers then contribute more to the DC plan to at least partially make up for it.