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Back from the Dead

There has been considerable hand wringing over the fate of defined benefit plans. But, thanks to a combination of economic and legislative factors, DB plans have a new lease on life for once-skeptical companies

By Robert Rosenberg | Updated on March 01, 2007

For all the talk about the fragility of the defined benefit (DB) plan, predictions of its death may have been premature. In fact, thanks to higher interest rates, improved equity returns and increased corporate contributions, many plans have come off the critical list and a few are fairly glowing from a transfusion of market gains, according to a recent analysis of Fortune 1000 companies with DB plans. That study, by Watson Wyatt Worldwide Inc., shows the number of big companies at serious risk because of underfunded pension obligations declining sharply in 2005, to 9% from 13% the year before and 17% in 2003. Even more impressive, Watson Wyatt now expects the aggregate funding status of these plans–pension assets versus liabilities–to hit 100% in 2006, up from 92% in 2005 and 82% in 2002.

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