More Pension Plans Frozen

Most pensions are closed only to new employees.

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If you’re still in the fortunate minority of workers with access to a traditional pension, these valuable retirement benefits may not continue until you retire. Companies are increasingly closing pension plans to new hires and even freezing new accruals for existing employees.

About 20 percent of private sector workers and 79 percent of state and local government employees participated in a traditional pension in March 2009, according to recently released Bureau of Labor Statistics data. But 19 percent of private sector pension participants and 10 percent of government employees are in frozen plans.

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Most private sector frozen pension plans (75 percent) are closed only to new employees, while existing workers continue to accrue new benefits. Other plans also stop new accruals for some or all existing participants (19 percent) or allow only some existing workers to accrue new benefits (6 percent). Workers generally get to keep the benefits they have already accrued, which are insured by the federal government up to certain annual limits. Most private sector workers are offered an alternative retirement plan such as a new 401(k) or similar type of retirement account (56 percent) or an enhanced existing retirement account (28 percent) when the traditional pension is frozen.

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Those with management and professional jobs are the most likely to have their traditional pension frozen (22 percent). Sales and office workers (21 percent) and production, transportation, and material moving employees (21 percent) were also especially likely to see their retirement plan closed to new employees. Natural resources, construction, and maintenance workers were the least likely to be invested in a frozen pension plan (8 percent).

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A union card appears to offer some protection against losing pension benefits. Nonunion workers were considerably more likely to have their pension plan frozen (24 percent) than union employees (10 percent). Participants with low salaries were more likely to be in frozen plans (42 percent) than Americans in the top 10 percent earnings bracket (22 percent). And almost a quarter (23 percent) of employees at mid-sized companies with between 100 and 499 workers had frozen pension plans compared to 11 percent of workers at establishments with fewer than 50 employees.