Pensions are becoming rarer and rarer in the United States, the Los Angeles Times reports. Two-thirds of employers that offer pensions plan to freeze them to new hires or eliminate them altogether over the next two years, according to a survey by the Employee Benefit Research Institute and Mercer Human Resources Consulting.
In the past two years, the survey also found, 25% of employers had closed pensions to new hires and another 13% had frozen them for all employees, for a total of 38% making some alteration.
Although analysts have been saying that pensions are becoming a thing of the past, the results of the survey surprised some.
“This is a watershed event,” said Jack VanDerhei, a pension specialist at Temple University. “There has been a steady decline in traditional pensions for two decades, but the trend is really accelerating, and it’s going to accelerate even more.”
While many companies that eliminate or phase out their pensions try to make up for it by matching 401(k) contributions, some believe it isn’t enough. The defined contribution plans “are not measuring up,” said David Certner, legislative policy director for AARP. “There are a lot more ways people can get tripped up with 401(k)s than with traditional pensions.”
During the booming stock market days of the 1990s, pension plans in the United States only had to collectively contribute $30 billion a year to keep them adequately funded, but after the crash of the stock market in 2000 and steep decline in interest rates, that tripled to $90 billion a year and left a number of pension plans underfunded.
While that has since stabilized, the Pension Protection Act has prompted 30% to freeze or close their plans, the survey found.
“Companies hate uncertainty, and this law has created a lot of uncertainty,” said Mauricio Soto, a research economist with Boston College’s Center for Retirement Research.