“The economic downturn has had a dramatic impact on employer-sponsored retirement plans,” said Tamara Shelton, principal and managing director of the retirement practice at Buck Consultants. “Due to decreased asset levels during 2008 and changes to funding rules governing defined benefit plans required by the Pension Protection Act of 2006, employers’ minimum contribution requirements for 2009 through 2011 will far exceed the 2008 requirements in many cases.”
In response to the downturn, the most common changes employers made to defined benefit plans were to freeze participants’ benefits at their current levels (68 percent of plans covering salaried employees) and to close the plan to new employees (32 percent of plans covering salaried employees).
Twenty-four percent of respondents elected to make changes to their defined contribution plans during 2009. The most common change was to reduce employer contributions. Only six percent of respondents with a defined contribution plan with employer matching contributions reported increasing their match during 2009. At the same time, the survey did not indicate any decline in enthusiasm for defined contribution plans as a retirement vehicle given that 23 percent of the plans without an automatic enrollment feature either added one or seriously considered doing so.
More than 40 percent of survey respondents reported that their defined benefit plan’s funded status had lost more than 20 percent of its value due to the economic downturn.
