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CCH® PENSION — 05/25/10

Small percentage of private and governmental DB plan participants were in frozen plans in March 2009: BLS

One-fifth of private industry workers and nearly fourt-fifths (79%) of state and local government workers participated in a defined benefit (DB) plan in March 2009, according to the U.S. Bureau of Labor Statistics (BLS). The BLS noted that, of these workers, 19% of private industry workers and 10% of the government workers were participants of frozen DB plans. The BLS’s definition of a frozen plan was a plan that was closed to employees who had not previously participated in the plan and/or that placed limits on future benefits for some or all active participants.

The rest of the private industry DB plan participants (81%) and of the government workers (90%) were in open plans, which the BLS defined as active plans available to current and new employees. These results come from the BLS National Compensation Survey: Employee Benefits in the United States, March 2009.

Percentage of frozen DB plan participants by category

Private industry. In private industry, the percentage of employees by occupation who participated in a frozen DB plan ranged from eight percent for natural resources, construction, and maintenance occupations to 22% for management, professional, and related occupations. By employer size, 19% of employees of establishments employing 500 or more workers participated in frozen DB plans, 23% of workers in businesses employing between 100 and 499 workers participated in frozen plans, 20% of workers in establishments employing 50 to 99 workers participated in frozen plans, and 11% of employees in businesses employing 1 to 49 workers participated in frozen plans.

Nonunion workers had a higher percentage of participants in frozen plans (24%) than union workers (10%). The percent of workers in frozen DB plans differed based on geographic areas. The highest percent (26%) of workers in frozen DB plans was in the East North Central division. The lowest percent (10%) was in the Pacific division.

State and local government. Frozen DB plans were less frequent among state and local government workers. As noted above, only 10% of these workers were in frozen DB plans, with no difference between state government participants and local government participants. According to the BLS, there was less variability among categories for government workers than in private industry, with one exception—geographic area. The percent of workers who participated in frozen DB plans ranged from 2% in the South Atlantic division to 26% in the New England division.

Length of time DB plans were frozen

Most private industry workers’ DB plans were frozen within the last two to five years (61%). Another 33% of these workers were in DB plans that were closed more than five years ago. The remaining 6% of the workers’ DB plans were frozen within the past year. In contrast, 94% of state and local government workers’ DB plans have been frozen for more than five years. Five percent of these workers’ plans have been closed for two to five years, and 1% have been closed for one year.

Accrual of benefits

Most private industry workers (75%) were in frozen DB plans in which all existing participants continued to accrue benefits. Six percent of these workers were in plans in which some, but not all, participants continued to accrue benefits. Nineteen percent were in plans in which no participants continued to accrue benefits. Almost all (99%) of the state and local government workers were in frozen DB plans that allowed participants to continue to accrue benefits. One percent of these workers were in plans in which no participants continued to accrue benefits.

Alternative plans

The BLS noted that when private industry DB plans were frozen, 94% of participants had one or more alternative plans available. New defined contributions plans were available to 56% of these participants. Twenty-eight percent of these workers had enhanced existing defined contribution plans. Eleven percent had a new defined benefit plan, while the remaining 1 percent had other types of alternative plans available. All state and local government workers with frozen DB plans had other options. Unlike private industry workers, the option was a new defined benefit plan for the vast majority of government workers (95%).

Source: U.S. Bureau of Labor Statistics, Program Perspectives, Volume 2, Issue 3, April 2010.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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