- The Washington Times - Thursday, May 10, 2007

NEW YORK (AP) — The nation’s largest companies continue to move away from traditional pension plans, with more than four in 10 now offering new workers only defined contribution accounts like 401(k)s, according to a survey released yesterday.

Of the nation’s 100 largest companies, 31 offered traditional pension plans last year, according to a study by the Watson Wyatt Worldwide consulting firm. That’s down from 35 in 2005 and only about a third of the 89 that offered traditional pensions in 1985, the study indicated.

By last year, 42 of the companies had moved to defined contribution plans, such as 401(k) accounts, which require employees to play a major role in funding their retirement savings. That’s up from 37 in 2005 and 10 in 1985, the study showed.

The rest — 27 companies — were using so-called hybrid defined benefit plans, such as cash-balance plans. These pension programs offer a guaranteed benefit such as a traditional pension but generally provide longtime workers with less in accrued benefits than traditional plans. That was down from 28 in 2005 but up significantly from the single plan offered in 1985.

Watson Wyatt, which is headquartered in Arlington expects further growth in the hybrid plans, especially after recent legislative changes and legal decisions have taken some of the uncertainty out of the programs.

Last summer, a federal appeals court reversed a lower court’s finding that International Business Machine Corp.’s cash-balance pension plan discriminated against older workers. The Supreme Court in January refused to review the case.

Also, the Pension Protection Act, which went into effect last August, contained a number of provisions that should give companies more confidence if they shift to hybrid plans, said Kevin Wagner, a senior retirement consultant at Watson Wyatt.

“A number of Fortune 100 companies are strongly considering hybrid pension plans,” Mr. Wagner said. “So we expect by this time next year, an increase in both hybrid and [defined-contribution] plans.”

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