Top Companies Continue to Drop Pensions
Top Companies Continue to Drop Pensions - Planning to Retire (Usnews.com)
Most new hires at the nation’s top employers were offered a 401(k) as their sole retirement plan this year. A record high of 70 companies in the Fortune 100 provided only a 401(k) or similar type of retirement account to new hires in 2012, compared with 67 firms in 2011 and 63 employers in 2010, according to a recent Towers Watson analysis. There are just 30 companies currently in the Fortune 100 that continue to offer a traditional (11 firms) or hybrid (19 firms) pension plan to new employees.
A traditional pension plan provides a steady annual income to former employees in retirement, generally based on their pay and years of service at the company. Hybrid plans typically provide a lump sum when participants leave the employer, but can sometimes be converted into lifetime annuity payments. Account-based plans like 401(k)s shift the responsibility for saving and investing for retirement from companies to individual employees. “The ongoing shift from defined-benefit to defined-contribution plans due to cost and cost volatility is helping to create a next generation of retirement-age workers who may not be able to afford to retire when they would ideally like to,” says Kevin Wagner, a senior retirement consultant at Towers Watson.
The retirement benefits offered to new employees at the nation’s top employers have changed significantly over the past 14 years. As recently as 1998, 90 companies in the Fortune 100 sponsored a traditional or hybrid pension plan. Since then there have been considerable changes to the retirement plans given to new hires. Just 10 Fortune 100 companies provided only a 401(k) account to new employees in 1998, which grew to 27 firms by 2004. The majority of Fortune 100 companies (53 firms) offered only a 401(k) for the first time in 200