Adopting Hybrid Pension Plans: Effects of Economic Crisis and Regulatory Reform

Robert L. Clark, Alan Glickstein and Tomeka Hill

in Reshaping Retirement Security

Published in print September 2012 | ISBN: 9780199660698
Published online January 2013 | e-ISBN: 9780191745058 | DOI:

Series: Pensions Research Council

Adopting Hybrid Pension Plans: Effects of Economic Crisis and Regulatory Reform

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This chapter examines the factors that affected plan sponsors’ decisions to convert a traditional defined benefit plan to a hybrid design. The study uses combined plan level data from Form 5500 filings and financial information from 10-Ks of Fortune 1000 companies to ascertain how the financial status of the plan sponsor, pension plan funding, and costs affected a decision to convert from a traditional to a hybrid design. The chapter also explores the timing of such conversions relative to major changes in federal regulations, specifically the passage of the Pension Protection Act of 2006 and the ensuing regulations as well as in response to the economic crisis. The chapter examines whether firms that converted in the early part of the decade did so for reasons that were different than those who converted in later part of the decade. The chapter assesses the role of the financial status of the plan sponsor in the conversion decision and compare this to the influence of the plan funding ratio, the investment patterns, and the overall plan cost. The chapter also describes the influence the economic crisis is likely to have on the choice of plan type.

Keywords: hybrid pension plan; defined benefit; Fortune 1000; financial status; plan funding

Chapter.  7504 words.  Illustrated.

Subjects: Pensions

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