2,700 more pension plans frozen in ‘03

WASHINGTON – Employers froze nearly one in 10 pension plans insured by the federal Pension Benefit Guaranty Corp. in 2003, according to a study released Wednesday.

The Pension Benefit Guaranty Corp., the federal agency that guarantees worker pension benefits, said 9.4 percent of the 29,000 plans it insures and for which it had data were “hard-frozen” in 2003, the most recent year for which numbers were available. The study comes amid a steady stream of headlines about companies, including Sears Roebuck & Co., Motorola Inc. and IBM Corp., freezing pensions to cut costs. Among the latest was Verizon Communications Inc., which recently said it would freeze the pensions of 50,500 managers.

The study, however, found that as of 2003 the frozen plans covered just 2.5 percent of all workers in insured plans. Most of the more than 2,700 plans hard-frozen in 2003 had fewer than 100 participants, it said.

That finding comes on the heels of other studies that have suggested in the past year a steep uptick in the number of firms that are freezing – either fully or partially – employee pension plans. They include one conducted by the consulting firm Watson Wyatt Worldwide that found that 71 of the nation’s 1,000 largest companies last year either froze or terminated their pension plans, up from 45 in 2003. Nearly all were freezes.

Pension Benefit Guaranty Corp. officials said the private sector studies, including the Watson Wyatt report, had “shortcomings.”

“While anecdotal evidence suggests that the number of frozen pension plans has increased since 2003, reports of a mass exodus from the defined benefit pension system appear to be overstated,” said Bradley Belt, the group’s executive director.

However, the report acknowledged that it does not illustrate the “full extent of the decline in the defined benefit system” since it does not track cases where employers have either partially frozen their pension plans or closed them to new entrants. These “numbers have almost certainly increased in the past two years,” the report concludes.

That and the age of the data mean the report fails to portray accurately recent and significant changes to pension plans, said Dallas Salisbury, president of the Washington-based Employee Benefit Research Institute.

“The PBGC report misses much of what has been happening among defined benefit plans,” Salisbury said in a statement.

Fewer workers covered by insured pension plans could make it harder for the federal corporation to improve its own financial position. It recently reported a deficit of $22.8 billion as it takes over payments of abandoned plans, particularly in the airline and steel industries. Defined-benefit plans are now underfunded by an estimated $450 billion.

The number of participants in insured pension plans grew to about 35 million in 2004, from 28 million in 1980. Most of the growth has come in the numbers of retired workers, as well as surviving spouses, covered by the plans and not in new workers, according to the study.

That, coupled with the freezing or terminating of plans, could mean the number of workers covered by insured plans could stagnate or shrink, the report said. If that occurred, it would cut into the Pension Benefit Guaranty Corp.’s premium income and make it even harder for the agency to improve its financial position, the report said.