More Fortune 100 Companies Offering Account-Based Retirement Plans to New Salaried Employees, Towers Watson Analysis Finds Shift Away From Traditional Pension Plans Continues

NEW YORK, May 26 /PRNewswire-FirstCall/ -- The number of large U.S. companies that are replacing their traditional defined benefit (DB) plans with account-based retirement plans for new salaried employees continues to increase, according to a new analysis by Towers Watson (NYSE, Nasdaq: TW), a global professional services company. Account-based plans include defined contribution (DC) plans, such as 401(k) plans, and hybrid pension plans, typically cash balance plans.

According to the Towers Watson analysis, 58 companies in the Fortune 100 currently offer only a DC plan to new hires, compared with 55 companies at the end of last year and 51 companies at the end of 2008. The most recent findings include three companies that announced this year that they will switch from a hybrid plan to a DC-only plan and three companies that are converting from a traditional DB to a hybrid plan. Meanwhile, 17 companies continue to offer a traditional DB plan, a decline from 20 at the end of last year and 24 at the end of 2008.

*Numbers indicate plans offered to new salaried hires at the end of each year. The 2010 column includes changes made this year and announcements of future plan changes through May 12, 2010.

"The movement toward account-based plans appears to be steady and strong, as companies shift away from traditional pensions," said Kevin Wagner, senior retirement consultant at Towers Watson. "And while most of the shifting has been toward 401(k) plans, we are seeing employer interest in cash balance plans too, as the provisions of the Pension Protection Act, which creates a more friendly environment for these plans, begin to take effect."

According to the analysis, 25 of the 42 companies with DB plans offer hybrids such as cash balance plans. Hybrid plans reduce cost and funded status volatility for employers while providing more visible benefits for employees than traditional DB plans. Participants in cash balance plans continued to see their pension accounts grow during the financial crisis, in marked contrast to most 401(k) accounts.

"Providing visible and adequate retirement benefits for their workers remains a high priority for large employers," said Alan Glickstein, 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. Employers will be better positioned to take advantage of recent legislative and regulatory changes that make cash balance plans more appealing to them and to their employees."

About Towers Watson

Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. The company offers solutions in the areas of employee benefits, talent management, rewards, and risk and capital management. Towers Watson has 14,000 associates around the world and is located on the web at towerswatson.com.

SOURCE Towers Watson