Number of companies freezing pension plans has surged this year (Excerpts)
Pension freezes are on the rise
Asbury Park Press — May 24, 2009
The number of companies that have frozen their traditional pension plans has accelerated sharply this year, a trend that will likely continue as companies wrestle with declining profits and poor investment returns.
At least 16 companies have announced plans to freeze their pensions so far this year, vs. 18 for all of 2008. Recently, Wells Fargo told its employees that their pension plans will stop accruing benefits July 1.
When a pension is frozen, employees get to keep the benefits they've already earned, but the company usually won't contribute any more money. Older employees are particularly hard hit because they have less time to make up for the loss, says Nancy Hwa, spokeswoman for the Pension Rights Center.
Severe investment losses in 2008 shrank the assets of the nation's largest pension plans to 79 percent of projected liabilities, down from 109 percent at the end of 2007, according to an analysis by Watson Wyatt. Companies, already hurting in the weak economy, have to increase contributions to make up the difference, and are facing stricter federal requirements about funding the plans.
More companies will freeze their pension plans unless Congress temporarily relaxes the funding requirements, says Dena Battle, director of tax policy for the National Association of Manufacturers. "When your funding obligations triple and you don't have the cash to deal with that and you don't get relief from Congress, you have to make hard choices," she says.
