Business

Study: Pensions still offered by 25 percent of big companies

Fewer retirees than ever depend on pensions, as opposed to 401(k)-type individual retirement plans.
J. Scott Applewhite /Associated Press
Fewer retirees than ever depend on pensions, as opposed to 401(k)-type individual retirement plans.

WASHINGTON — About one in four large employers still offer some sort of pension to new hires, according to a study released last week.

That may sound like a fair number of companies, especially at a time when most people starting new jobs only hear of pensions as a thing of the past. But a closer look at the numbers, from the professional services company Towers Watson, shows that companies are still scaling back what they offer.

For starters, fewer companies are still offering pensions, with the share of Fortune 500 companies that provide them to new hires falling to 24 percent at the end of 2013, from 60 percent in 1998.

Advertisement

Alan Glickstein, a senior retirement consultant at Towers Watson, says the decline is stabilizing, however. ‘‘There’s a move away from pensions, that’s nothing new,’’ he says. ‘‘But the move is slowing.’’

Get Talking Points in your inbox:
An afternoon recap of the day’s most important business news, delivered weekdays.
Thank you for signing up! Sign up for more newsletters here

The most common type of defined benefit plan offered to new hires is a hybrid pension, a combination of a 401(k) plan and a cash balance fund that is typically less generous than a traditional pension. Fourteen percent of the companies studied offered hybrid plans in 2013, unchanged from the previous year.

Only 7 percent of the employers offer new employees traditional pensions, which pay out a certain amount at retirement, based on a worker’s pay and how long the worker stayed with the company.

So where can you still get a job with a pension?

The plans are more prevalent in certain industries. For instance, defined benefit plans are still offered by most large insurance and utility companies, Towers Watson says. But the plans are nonexistent among aerospace, construction, and tourism companies, which only offer contribution plans, such as a 401(k) plan.

Advertisement

Utilities may have been able to preserve retirement plans because they tend to be heavily unionized, Glickstein says. Some employers may be using pensions and other defined benefit plans to encourage people to retire at a good time, since the nature of the work can be physically demanding, he adds. Utility companies may also have an easier time passing along pension costs to customers than firms in other industries.

As for insurers, many of them are mutually owned by their policy holders, which means they don’t have to report pension costs to shareholders and may have more control over the perks they offer.