The last two decades have witnessed a sweeping shift in retirement offerings from large employers, most of whom now provide only defined contribution (DC) and other account-based plans to newly hired employees. The shift away from traditional defined benefit (DB) to account balance plans gives today’s increasingly mobile workforce more choices, flexibility and transparency, and helps employers manage the ongoing costs and risks/opportunities of providing retirement benefits.

Companies have made the transition to account-based plans in a variety of ways. Some closed or froze their traditional DB plans and then moved workers into hybrid pensions, while others transitioned workers to a DC-only environment, sometimes offering a hybrid pension to some workers along the way.

This study takes a historical look at the primary retirement plans offered by current Fortune 500 companies between 1998 and 2017, thus showing how their retirement programs have evolved over the last 20 years.

Evolution of DB plan sponsorship for Fortune 500 companies, 1998 – 2017

Evolution of DB plan sponsorship for Fortune 500 companies, 1998 – 2017
Click to enlarge

Key findings:

  • In 2017, only 16% of Fortune 500 companies offered a DB plan (traditional or hybrid) to new hires, down from 59% among the same employers back in 1998.
  • 51% of these companies still employ workers who are actively accruing pension benefits, and 93% of those who sponsored a DB plan in 1998 still manage plan obligations and assets.
  • There has been an uptick in plan freezes since the 2008 financial crisis among plans that were already closed to new hires. In 2008, 20% of companies that had offered a DB plan in 1998 had frozen their pensions and 19% had closed their primary plan to new entrants. By 2017, 42% sponsored a frozen plan and 24% had closed their primary plan.
  • More than half the pension sponsors in this analysis had a hybrid DB plan at some point, and 44% of them were still offering the same plan to new hires in 2017.
  • Certain industry sectors, as well as employers whose pensions are relatively small (as compared with their market capitalization) and/or well funded, are more likely to offer a traditional pension plan to new hires.
  • After eliminating a DB plan for new hires, most employers contribute more to the DC plan.