According to an analysis by benefits consulting firm Watson Wyatt, the number of
large employers that offer only defined contribution/401(k) plans—and not
traditional pension plans—is way up. In 2005, 36 percent of Fortune 100
companies offered 401(k) plans only (not in combination with a traditional
pension plan), up from 25 percent in 2004 and 17 percent in 2002.
At the same time, the percentage of these employers offering a traditional
pension plan continued to decline in 2005—sinking to 37 percent in
2005 from 42 percent in 2004. In 1998, 68 percent of employers offered a
traditional pension plan and just 10 percent offered a 401(k). Hybrid plans are
also on the decline, according to Watson Wyatt. These plans, generally cash
balance and pension equity plans, were offered by just 27 percent of employers
in 2005, compared to 33 percent in 2004.
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In connection with its
findings, Watson Wyatt stated: “Unless Congress takes some definitive action on
pension reform legislation, employers may ultimately conclude that they have
little choice other than to abandon these plans in favor of only a 401(k) plan,
even if that is not the right decision for their company and workforce.”
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