Only 17 Fortune 100 Companies Still Offer Defined Benefit Retirement Plans

The campaign to end defined benefit plans for government employees has bogged down from Sacramento to Washington D.C. But in the increasingly Brigadoon-like "private sector," DB plans have all but vanished.  Of the biggest companies in America, only 17 have yet to switch over to 401(k) or hybrid plans.

What waistcoat-wearing, pipe-smoking corporate sugar daddies are still offering total retirement packages? An oldy from TheStreet.com discusses the large companies that have yet to emerge from the Paternal Age:

A survey by Towers Watson, the global consulting firm, found that only 17% of Fortune 100 companies still offer a direct-benefit plan, down from 67% in 1998. Those that offer direct-contribution plans, such as 401(k)'s, total 58%, up from 10%. Despite the decline, many of the country's best-known companies still offer pensions to at least some employees.

General Electric(GE), in its annual report, said its plan was fully funded as of Jan. 1 and running effectively enough that it shouldn't have to subsidize it this year or next. It holds assets of $58.3 billion.

Responding to stock-market conditions, Exxon Mobil(XOM) contributed $3 billion to its U.S. plans, up from $53 million in 2008.

Other large direct-benefit plans include AT&T(T), Verizon(VZ), Ford(F), Lockheed Martin(LMT), UPS(UPS), Honeywell(HON), Johnson & Johnson(JNJ), Procter & Gamble(PG), Hewlett-Packard(HPQ), 3M(MMM), Pepsi(PEP), Bank of America(BAC), Citigroup(C) and Wachovia.

Here's the Towers Watson survey [pdf]. The composition of the Fortune 100 changes over time -- only 31 companies of the companies on the list in 1985 (when 89 out of the 100 offered straight DB plans) are still there today. (Of those 31, 16 still offer DB plans.) But even controlling for those changes, the shift away from DB plans is clear. (And the fact that your DB-offering company has slipped out of the Fortune 100 is itself an indication that DB-offering companies are in eclipse.)

This is a major generational shift in free market employment. And it's a shift that government employees have not even begun to confront. It's like going to work for the government automatically turns you into a baby boomer.

Comments

[Fist of Etiquette]

WHO WROTE THIS??? I demand transparency.

(Note: At the time this comment was made, no name was attached to this post.)

Also, terrorism/AGW is going to do us all in before we reach retirement age.

[?]

WHO WROTE THIS???

Dude. "Brigadoon-like" = Cavanaugh or Welch. Pension = Cavanaugh.

[Fist of Etiquette]

In my defense, the post was bookended by two other Cavanaugh posts, both of which about how terrible California is.

[Beavis]

Huh-huh. He said "private sector".

[Virginia]

17%? I'm surprised it's not lower for private companies.

Considering GE got a massive federal bailout, I no longer consider them private.

[SIV]

Not like the bailout Wachovia got.
Wachovia should be long dead, that they haven't poisoned Wells Fargo is a miracle of government/central bank intervention.

[Episiarch]

It's like going to work for the government automatically turns you into a baby boomer.

You mean "going to work for the government automatically turns you into someone who enthusiastically steals from younger/other people to fund your retirement". Stop being so coy.

[Boomer]

Don't be coy. We're being stolen from too. Have been since the beginning.

[Old Mexican]

A survey by Towers Watson, the global consulting firm, found that only 17% of Fortune 100 companies still offer a direct-benefit plan, down from 67% in 1998.

Nostalgics.

[EDS]

I am a Federal Law Enforcement employee. The last of the CERS emplyees, who have a wonderful defined pension, are now retiring. I will be in the first wave of FERS retirees. FERS is a hybrid plan- part defined pension, part Thrift Savings(our 401k). The plan is still generous, but is still much less generous than CERS. If California switched to a FERS like plan I think they could deal with the monster that has been created.

[A Fed]

CSRS (not CERS) was abolished in 1984 for Federal employees, and replaced by FERS. FERS is a defined benefit plan that pays 1/2 of the previous plan, and is indexed to increase by 1% less than the CPI. The 401K portion of the plan is very similar to plans offered by private business.

You can't live on the FERS part of the retirement benefits alone, so you wind up having to contribute a substantial portion of your earnings to the 401K (15% in my case). If you save in the 401K, and if you don't get wiped out by the market and if the politicians don't appropriate your money for some worthy cause, then you wind up at the end of a 30 year career with about 50% of your pay at retirement. It strikes me as about the same as a large private employer.

[robc]

Ummm...a large private employer wouldnt have the FERS portion, just the 401k. If the FERS part is 1/2 the CSRS plan, and assuming the CSRS plan was a reasonable pension, that 1/2 is a big frickin bonus.

Alos, I think your math is wrong on the 401k portion, but that depends on a lot of assumptions.

[fd]

Rob,
You should actually look at the CSRS vs. FERS. The FERS (current) system is not nearly as generous as the CSRS. For you information, the Federal gov't is similar to some Fortune 100 companies in that it's a hybrid system.
The basic positive, from a corporate standpoint, is that the risk of weak returns is shifted entirely onto the employees.

[Tulpa]

Holy Misleading Chart, Batman!

The period from 1985 to 2002 (17 years) is represented by three bars, but the period from 2004 to 2010 (7 years) is represented by eight?

The decline in DB has been precipitous since 2002 compared to the previous two decades, but the chart obscures this fact by making it look like a gradual decline.

[Tulpa]

Correction: 2004 to 2010 is 6 years, represented by seven bars. I originally had 2003 there thinking the 2002 bar was 2003 and screwed up the edit.

[Stormy Dragon]

I should note that in the Lockheed Martin case, the Defined Benefit plan only applies to workers hired earlier than four years ago. Everyone hired since then is in a defined contribution plan instead.

I wonder how many of the other companies only have defined benefit plans in the sense that they're still in the process of winding them down.

[robc]

This would be my guess for most of them. Except executives. CEOs, for some reason, tend to have defined benefit plans, which makes no sense to me.

[robc]

Note: I havent flipped thru that many annual reports this last decade, when most of this change occurred (as pointed out by Tulpa), so my comment on CEOs might be out of date.

[Joe]

If a company only offers a 401k plan then what they are saying is you can never retire. Never!!!!!! A 401k savings plan will never live up to the hype that a company claims. So what we are seeing is no one in the middle class or working class ever being able to retire from their job. Sure they can retire and recieve a very small social security pension, at age 62, but they never truly retire from their job because their job has no retirement. Does anyone ever wonder why folks are not loyal to their jobs anymore? I don't. If all I'm working for is food and shelter then you will get a good days work but nothing else. I'm not going to company picnicks, I'm not doing my co-workers job when he is out sick, I'm not being friendly with the boss or working extra hours unless I'm getting overtime. If all it is about is the bottom line then I can adapt to that mentality. When another company ofers me 3 or 5 dollars more on the hour I'm gone. Don't preach to me about being a loyal employee because you give me no reason to stay. If it's only about money then I will change companies everytime I'm offered a dollar more on the hour. Good Day Joe.