Data & Research May 11, 2009

Cash Balance Plans Gain Speed in Fortune 100

For the first time, the majority of Fortune 100 companies now offer new salaried employees only a defined contribution (DC) plan, such as a 401(k), according to a Watson Wyatt.
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In another first, more Fortune 100 companies offer hybrid pension plans, such as account-based cash balance plans, rather than traditional defined benefit (DB) plans.

Today, 55 companies in the Fortune 100 offer only DC plans to new hires, a jump from 46 at the end of 2007, according to a news release about the Watson Wyatt analysis. The numbers include four companies that announced in 2009 that they will switch from a DB to a DC-only plan.

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Among those companies still offering DB plans, 22 have traditional plans and 23 offer hybrids such as cash balance plans.

“The trend toward account-based plans is likely to continue because of their visibility and transparency. With the exposed weaknesses in 401(k) plans and the ever-present need to manage the workforce, more companies might opt to provide hybrid plans, now seen as a viable alternative to offering only a DC plan. However, to reduce costs, companies might instead continue cutting back on employer-sponsored retirement benefits in general. The two paths will have significant, yet very different, implications on the retirement of millions of workers,” commented Kevin Wagner, senior retirement consultant at Watson Wyatt, in the release.


Fortune 100 Retirement Plan Offerings

Plan type 1998 2002 2004 2005 2006 2007 2008 2009

Traditional 67 49 40 34 30 28 24 22

Hybrid 23 34 34 29 28 26 25 23

DC only 10 17 26 37 42 46 51 55

Products May 11, 2009

ING Announces Intent to be 403(b) Prototype Plan Provider

ING U.S. Retirement Services (ING) notified the IRS of its intention to file an opinion letter application as a Section 403(b) prototype plan sponsor.
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ING, provider of K-12 and higher education 403(b) retirement plan products and services, anticipates its letter will be filed as soon as the IRS begins accepting applications from retirement plan providers seeking favorable determinations on their prototype plan documents, according to a news release.

“School systems across the country can be confident that the prototype we develop will satisfy the Internal Revenue Service’s written plan requirements and be updated as needed to reflect tax law changes, helping to meet the ongoing retirement needs of our school systems,” said Linda Segal Blinn, vice president of Technical Services at ING, in the release.

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The 403(b) prototype plan program will allow eligible employers to adopt a pre-approved plan and have assurance that the form of the plan meets all 403(b) regulatory requirements. The IRS announced the program on April 14.

Robert J. Architect, IRS Senior Tax Law Specialist, told PLANSPONSOR‘s 403(b) Summit attendees that determination letter reviews for the prototypes could begin as soon as the first quarter of 2010 (see “IRS Releases Proposed 403(b) Prototype Document Program“).

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