Defined benefit plans may be in a long-term decline, but they also show signs of resiliency, according to the Department of Labor’s Employee Benefits Security Administration.
In “Private Pension Plan Bulletin: Abstract of 2017 Form 5500 Annual Reports,” which EBSA released recently, the agency reports that based on the Forms 5500 that employers submitted concerning the 2017 plan year, DB plans face longstanding challenges but by some gauges show vitality.
EBSA notes that there is a 40-year-long shift from DB plans to DC plans. It attributes this trend to the enactment of legislation that paved the way for the advent of 401(k)s, increased worker mobility, greater life expectancy and the decline of industries that commonly offered pensions.
And, EBSA adds, the slow bleed may not be staunched. EBSA found that DB plan participation fell by 3% in 2017, and warned, “Participation in DB plans may continue to decline as more DB plans in the private industry close to new entrants.”
DB plans disbursed 243.4 billion in 2017, EBSA reports, a 4.8% increase; overall, they disbursed $84.5 billion more than they received in contributions during 2017. And the assets in frozen DB plans increased from 17.1% of DB plan assets to $17.7%.
But the Sun Still Shines
Despite noting the long-term trends, EBSA also reported good news for pension plans:
- The "deep freeze" may be thawing a bit; EBSA says that in 2017, the share of DB plans that were fully frozen decreased to 19.5% of all DB plans.
- The total number of DB plans grew by 0.9% in 2017.
- DB plan contributions increased by 26.7%, to $159 billion.
- DB plan assets increased 9.8% to $3.2 trillion.