While a number of high-profile pension plan terminations have received widespread attention in recent years, a related and equally important issue is the degree to which companies that sponsor ongoing pension plans are "freezing" benefits. Until now, the available data on plan freezes came primarily from client surveys conducted by benefits consulting firms. The surveys do not adopt a uniform methodology or definition of the term "freeze," which can mean closing the plan to new entrants or ceasing accruals for some or all plan participants. Additional anecdotal evidence on plan freezes is available from news accounts of well-known companies that have frozen their plans in recent years, such as Verizon, IBM, Motorola, Sears and NCR.
To gain a more complete and accurate picture of plan freezes, the Pension Benefit Guaranty Corporation analyzed the most recently available comprehensive data provided by plan sponsors themselves. These data come from the 2003 Form 5500 "Annual Return/Report of Employee Benefit Plan" that each company sponsoring a tax-qualified defined benefit pension plan must file with the Internal Revenue Service, the Department of Labor, and the PBGC. The Form 5500 asked whether or not the employer's pension plan was "hard-frozen," meaning no participants were accruing any new benefits under the plan. According to the 2003 Form 5500s, 9.4 percent of the single-employer defined benefit pension plans insured by the PBGC were hard-frozen. For perspective, most of these hard-frozen plans were small plans with fewer than 100 participants, with the result that only 2.5 percent of the participants in PBGC-insured plans were affected by these plan freezes.
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