The last few decades have witnessed a dramatic shift in retirement benefits, as most newly hired employees enter a retirement environment that is largely dominated by account-balance-based plans. This shift from traditional defined benefit (DB) plans1 to account balance plans provides more choices and flexibility to today’s mobile workforce, enables greater transparency, and helps employers manage the ongoing cost and risks of providing retirement benefits, which has been particularly difficult in the face of rising health care costs and historically low interest rates.

Companies begin the transition to account-based plans in a variety of ways. Some employers have closed or frozen their traditional DB plans and moved workers into hybrid pensions.2, 3 Others are transitioning to a defined contribution (DC)4-only environment, in some cases offering a hybrid benefit to certain workers along the way. Many sponsors now manage multilayered plan designs to accommodate different workforce segments, and most continue to sponsor DB plans.

These transitions have left employers and employees navigating an increasingly complex benefit environment with considerably more complicated retirement structures. Many employers now administer and fund different retirement programs for different employees, with the workforce dynamics that can ensue when all employees do not receive the same retirement benefits.

Willis Towers Watson has been tracking the retirement plans offered by large companies for many years.5 This year’s analysis takes a historical look at the primary retirement plans offered to salaried workers between 1998 and 2016 by companies in the 2016 Fortune 100, thus showing how these companies’ retirement plans evolved over the 18-year period.

The analysis focuses on employers’ largest salaried plan offered to newly hired workers. If a company sponsored different plans for hourly/collectively bargained workers, the analysis only considers the plan for the salaried workers. If different salaried segments had different plans, the study focuses on the primary plan offered to the salaried workforce (typically the one that covers management). Some sponsors have closed or frozen their salaried plan but still maintain open plans for hourly or collectively bargained workers. According to a recent Willis Towers Watson survey, among companies that sponsored both a union and non-union plan, 25% had open non-union plans, while 41% sponsored an open union plan.6

In 1998, 64 companies in today’s Fortune 100 offered a traditional DB plan to newly hired workers, compared with only two today. While this is a steep decline, a significant number of these sponsors still offer pension plans to newly hired workers, mostly in the form of cash balance hybrid plans.

The financial obligations of DB plans continue for many years after an employer closes the plan to new hires. The majority of today’s Fortune 100 pension sponsors still maintain DB plans in which some workers are actively accruing pensions, and two-thirds (66) still manage the pension obligations and plan assets associated with these DB plans. The 66 companies reflect the management of salaried plan liabilities. If plans for non-U.S., hourly and collectively bargained workers; plans for subsidiaries; and pension obligations acquired through acquisitions or mergers are included, the number of Fortune 100 companies managing DB obligations increases to 75.

Progression of retirement plan offerings

In 1998, 71 of the companies in the current Fortune 100 offered some form of DB plan to salaried new hires, while 29 offered only a DC plan (Figure 1). Even more significantly, 64 of these companies offered a traditional DB plan to newly hired workers back in 1998, versus two today. Even back then, retail and high-tech employers tended not to offer DB pensions. Today, 73 of the current Fortune 100 companies provide only DC plans for new hires.

Figure 1. 2016 Fortune 100 retirement plan sponsorship, 1998 – 2016

Figure 1. 2016 Fortune 100 retirement plan sponsorship, 1998 – 2016
Click to enlarge

Source: Willis Towers Watson

Between 2005 and 2012, companies in the 2016 Fortune 100 closed DB plans to new hires at a fairly rapid pace — an average of four companies a year. Since 2012, four sponsors have closed a pension to new hires.

Today, most (93%) DB plans offered to new entrants are hybrid pension plans. Among 2016 Fortune 100 employers that offer a hybrid plan to new hires, 92% provide a cash balance plan and the rest offer other hybrids, such as stable value plans. This trend has flipped completely since 1998, when 90% of these same Fortune 100 pension sponsors provided a traditional DB plan, typically a final average pay plan.

Various paths taken by pension sponsors

Since 1998, the vast majority of employers have redesigned their retirement structures, steadily shifting newly hired workers away from traditional DB plans to either account-based DB or DC plans. Employers often took more than one path to arrive at their current retirement plan structure. Some sponsors remained committed to providing pension plans to some or all workers, while others made different choices. To illustrate the complexity and dynamics of plan changes, Figure 2 shows the various paths companies in today’s Fortune 100 have followed to their current plan offerings.

Figure 2. Various paths taken by today’s Fortune 100 DB sponsors to arrive at current offering for new hires

Figure 2. Various paths taken by today’s Fortune 100 DB sponsors to arrive at current offering for new hires
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Note: Includes changes made since 1998.
*Includes one company that terminated its hybrid DB plan.
**Includes four companies that terminated their traditional DB plans.
Source: Willis Towers Watson

Ninety-seven percent of today’s Fortune 100 employers that sponsored traditional DB plans in 1998 no longer offer those plans to new hires. Since 1998, roughly one-third froze or closed their primary traditional DB plan and transitioned newly hired workers into a DC-only environment, while 64% switched to a hybrid design. Most (52%) of the companies that established a hybrid plan for salaried workers have kept the plan open to new hires. Twenty-three of the Fortune 100 employers that converted workers to a hybrid plan since 1998 still offer the plan today.

Figure 2 also illustrates the increasing complexity of retirement plan management. The vast majority of sponsors did not simply freeze their traditional DB plan outright. Instead, they followed a multistep approach to their current retirement offerings. In some companies, certain participants are still accruing pensions in their traditional plan, others are accruing benefits in a hybrid plan, while those hired after a certain date are accumulating retirement savings in a DC-only environment. These sponsors must manage different benefit structures for different employee segments.

Figure 3 depicts the evolution of open, closed, frozen and terminated DB plans among today’s Fortune 100 pension sponsors. Today, 55% of these pension sponsors are still accruing benefits in their DB plans for some workers. Although 17% of DB plan sponsors closed their DB plans to employees hired after a certain date, most of those who were participants when the plan closed continue to accrue benefits today.

Figure 3. Evolution of DB plan sponsorship among today’s Fortune 100

Figure 3. Evolution of DB plan sponsorship among today’s Fortune 100
Click to enlarge

Note: These results reflect only the most recent change to the retirement plan. For example, if an employer closed a plan and then later froze it, the results capture the freeze.
Source: Willis Towers Watson

At the other end of the spectrum, some sponsors decided to freeze pension accruals altogether. The incidence of pension freezes has risen significantly in recent years, and many of those sponsors first closed the plan to new hires and then later froze accruals as steps in their “journey plan” for managing pension risks.7 Some of these sponsors were influenced by the effect of nondiscrimination testing on closed DB plans.8

Twelve of the 27 companies that froze their primary DB plan after 1998 had closed the plan at an earlier date. Of plans that followed this close-then-freeze sequence, the average interval between closing and freezing was 5.8 years, with the interval ranging from one year to 11 years. This pattern has become more common over the last few years, as the pace of plan closings has slowed. While only two companies have closed their plans to new hires since 2014, seven companies have frozen their plans — six of which had closed the plan at an earlier date.

Some employers have gone on to terminate their DB plan as the final phase of journey planning and risk mitigation. Terminating a plan involves freezing benefits and then fully discharging the pension obligation with annuity purchases and/or lump sum payments to participants. There has been an uptick in terminations — five Fortune 100 companies have terminated their primary plans since 2005, with four of the terminations within the last three years. The recently terminated plans were relatively small and, in some cases, companies terminated their primary salaried plan but still maintain smaller plans or unfunded nonqualified plans.

While the companies that terminated their plans recently settled an average of roughly $800 million in pension liabilities, the median liability held by current Fortune 100 DB plan sponsors at the end of 2015 was $11 billion. Most Fortune 100 companies still have the challenging task of managing enormous pension liabilities, even for plans that are frozen or closed.


In the ongoing shift to account-based plans, some employers have been paring back overall spending as well as spreading the benefits more evenly, rather than concentrating benefit values on older and long-tenured workers. While this helps meet the needs of a growing segment of millennials9 and shorter-tenured workers, account-based plans shift more responsibility to employees, which will challenge both sponsors and workers in the future.

These changes in retirement offerings come at a time when a sluggish economy coupled with memories of the last financial crisis have employees — especially millennials — worrying about their long-term financial security. In a recent survey by Willis Towers Watson,10 six in 10 responding millennials said they were willing to sacrifice some pay for more secure retirement benefits. These workers would like their employers to play a greater role in helping them prepare for retirement. A recent survey addressing retirement governance found that 39% of responding employers viewed lack of retirement readiness as a risk and planned to shift resources to address this risk in the next two years.11

Many employers are trying to ensure their retirement program resources are being spent effectively and give employees more support by making financial best practices a core part of their overall well-being strategy. Some have expanded their current wellness programs to include onsite support, such as debt management and budget counseling, and new technologies to create an engaging and rewarding experience for their workforce.

The shift that is under way from traditional DB pension plans to account-based DB plans or a DC-only environment is well established. Nevertheless, many DB sponsors in the Fortune 100 still offer pension plans to new hires, albeit in a hybrid form, and the majority of companies with pensions are continuing to accrue benefits for many workers, administer the plans, and manage plan assets and obligations. The transition to account-balance plans is presenting new opportunities and challenges for both employers and employees in terms of workforce/risk management and retirement security.


1. A traditional DB plan provides a defined amount at retirement, based on a formula that is typically linked to pay and years of service, with the benefit defined as an annuity (although many DB plans now offer lump sum distributions). The value of benefit accruals increases as a participant nears retirement and the plans can provide a predictable income stream to retirees.

2. When a sponsor freezes a DB plan, some or all benefits stop accruing for some or all participants. For example, the plan might stop accruing benefits linked to service but continue those linked to pay. Benefits might stop accruing for all participants younger than 50 with 15 or fewer years of service. After a sponsor closes a pension plan, benefits continue to accrue for participants but no one else can join the plan.

3. Hybrid DB plans define the retirement benefit as an account balance rather than an annuity. Hybrid benefits typically accrue more evenly across a worker’s career (although designs can increase benefit accruals by age, service or a combination of the two). When hybrid plan participants leave their employer, they usually take their account balance with them. As hybrids are DB plans, they must offer an annuity as the primary distribution option.

4. A retirement plan, such as a 401(k) or 403(b), in which employees elect to defer some compensation into an account that they typically manage, including choosing investment options. Most employers contribute to the account as well. These plans generally allow employees to take their account balance with them when they leave the company, or transfer it to another employer-sponsored plan or individual retirement account.

5. See “A Continuing Shift in Retirement Offerings in the Fortune 500,” Willis Towers Watson Insider, February 2016.

7. A journey plan is a formal de-risking strategy, typically involving preapproved actions taken when predefined triggers are met. De-risking strategies can consist of plan design changes, funding/investment changes and settlement activity. Ultimate goals and strategies vary among sponsors. Plan termination is the ultimate step in the de-risking journey.

8. In a closed DB plan, participants who are still accruing benefits generally become more highly paid over time, due to increasing age and experience as well as higher attrition among lower-paid employees, which can cause the plan to fail nondiscrimination tests.

9. Individuals born between 1980 and 2000.

10. See “Global Benefit Attitudes Survey 2015/16,” Willis Towers Watson, February 2016.