Most new hires at top U.S. companies will not be invited to join the pension plan this year. Only 17 companies in the Fortune 100 currently offer traditional pensions to new hires, down from 20 in 2009 and 67 in 1998, according to a new Towers Watson analysis. Another 25 companies offer hybrid pension plans, such as cash balance plans.
[See More Pension Plans Frozen.]
Use of 401(k)s continues to grow with 58 companies offering only a retirement account to new hires, up from 55 companies in 2009 and 10 companies in 1998. This year three Fortune 100 companies switched from a hybrid pension plan to a 401(k) plan and three companies converted a traditional pension to a hybrid plan. “While most of the shifting has been toward 401(k) plans, we are seeing employer interest in cash balance plans too,” says Kevin Wagner, a senior retirement consultant at Towers Watson.
401(k) plans began to outnumber pensions at Fortune 100 companies in 2008. Towers Watson does not expect companies to return to more generous retirement benefits as the economy rebounds. Says Alan Glickstein, a senior retirement consultant at Towers Watson: “As the economic climate improves, we fully expect to see the trend toward account-based plans to continue in the foreseeable future.”