Summary c1

Hard-Frozen Defined Benefit Plans

Findings for 2003-2004 and Preliminary Findings for 2005

August 2008
Contents

Summary 1

Background 2

Results of This Study 3

Hard-Frozen Plans by Plan Size 3

Participants in Hard-Frozen Plans 4

Types of Single-Employer Plans 5

Funding Level of Frozen Plans 6

Liabilities and Assets 7

Sponsors of Multiple Plans 8

Hard-Frozen Plans by Industry 8

Collective Bargaining Status 10

Decision to Terminate 10

Dynamics of the Change in the Percent of Hard-Frozen Plans 10

Conclusions 15

Appendix 1: Recent Studies Related to Plan Freezes 17

Percent of Plans That Have Been Frozen 17

Reasons Plans Were Frozen 19

Consequences of Freezing a Plan 20

Bibliography 22
Summary 1

Hard-Frozen Defined Benefit Plans

Findings for 2003-2004, and Preliminary Findings for 2005

Summary

In December 2005, PBGC published an analysis of defined benefit pension plans 

that were hard-frozen in 2003. (In a hard freeze, all benefit accruals in the plan 

cease.) That analysis found that, based on data then available:

• 9.4 percent of PBGC-insured single-employer defined benefit pension plans 

were hard-frozen at the end of the 2003 plan year;

• small plans were much more likely than large plans to be hard-frozen;

• only 2.5 percent of the participants whose single-employer benefits PBGC 

insures were then in hard-frozen plans.

Updated information for the 2003 plan year shows 9.5 percent of insured plans 

were hard-frozen at the end of 2003 but shows no increase in the percentage of 

participants covered by such plans.

Form 5500 data are currently available for almost all plans insured in 2004 and for 

about 90 percent of those insured in 2005. These data indicate that: 

• 12 percent of PBGC-insured single-employer plans were hard-frozen at the 

end of the 2004 plan year;

• 14 percent were hard-frozen at the end of the 2005 plan year; 

• 3.5 percent of all covered participants were in hard-frozen plans in 2004; 

• 6.1 percent of all participants were in such plans in 2005.

The 2005 hard-frozen plan figure represents a 50 percent increase in the percentage 

of insured plans that were hard-frozen in just two years. The jump in the 

percentage of participants in hard-frozen plans from 2004 to 2005 can be attributed 

to the hard-freezing of three very large plans in 2005. 

The level of freeze-related activity, both freezing and thawing, is more extensive 

than the net change would suggest. (A thawed plan is one reported to be hardfrozen in one year but not in the following year.) While the number of hard-frozen 

plans showed a net increase of about 700 plans between 2003 and 2004,1

 this 

reflects the freezing of about 1,300 plans during 2004 and the reported unfreezing 

or termination of about 600 plans that were reported frozen in 2003.2

 Preliminary 

indications are that there was also significant new freezing and thawing activity 

during the 2005 plan year. 

1

 Because final 2005 data are not yet complete, this update only reports 2005 data by percentage of plans that 

were frozen, based on available data, but not by the number of plans. 2

 Plans that did not file a 2004 Form 5500 are assumed to have terminated.
2 Background

Background

In 2002, a new frozen plan question was added to the Form 5500, the report 

pension plans are required to file annually with the Internal Revenue Service, the 

Department of Labor, and PBGC. This new question is a feature code for defined 

benefit pension plans that asks whether “as of the last day of the plan year, the 

plan provides that no participant will get any new benefit accrual (whether because 

of service or compensation).” In short, it asks if the plan is frozen under a “hard 

freeze” definition. The frozen plan data on the 2002 Form 5500s were not properly 

processed, limiting their usefulness. Thus, the 2003 data were the first that could 

be analyzed.

The value of the frozen-plan question is somewhat limited because not all plan 

freezes are hard freezes. A plan that is closed to new entrants but allows those 

already in the plan to continue to accrue benefits does not meet this definition. 

Neither does a plan that freezes benefit accruals for some, but not all, participants 

(a “partial freeze”). A plan that freezes service accruals for all active participants 

but allows benefits to increase with the growth in participants’ wages (a “soft 

freeze”) also fails to conform to the hard-freeze definition. News reports on plans 

that are being closed to new entrants or frozen for only certain classes of workers 

suggest that these other types of freezes are relatively common. However, Form 

5500, on which PBGC bases its analysis, does not contain data that can be used to 

determine how common they actually are. Because these lesser frozen plans cannot 

be identified from the Form 5500 data base, they are assumed to be unfrozen plans 

for purposes of this study. 

It generally takes about two years from the beginning of the plan year for Form 

5500 data to reach PBGC. Thus, the data for 2004 are the most recent that are 

available for all insured plans. Data for 2005 are currently available for about 90 

percent of the single-employer plans PBGC insured that year. As a result of this 

lag in data availability, recently announced hard freezes, such as those announced 

by IBM, Unisys, and Citigroup, are not included in these data.

A number of frozen plan studies have been published recently (see Appendix I). 

The studies often do not define what constitutes a frozen plan, or they combine 

frozen plans with plans having other characteristics. This makes it difficult to 

compare results across studies. And, as these studies generally are based on nonrandom samples of large plans, their results generally will not apply to the entire 

population of defined benefit plans. Unfortunately, the press frequently reports the 

results as if they did.
Results of This Study 3

Results of This Study

The findings for the 2005 study were updated to take into account data for 

plans whose 2003 Form 5500s were not available at the time the 2005 study 

was undertaken. This update found that a slightly larger percentage of insured 

plans—9.5 percent—were hard-frozen in 2003 than was originally reported 

(9.4 percent). The changes from 2003 to 2004 reported below use these updated 

2003 findings as the base. The 2005 data reported are based on the 2005 Form 5500 

filings that are currently available.

Hard Frozen Plans by Plan Size

Overall, the proportion of PBGC-insured plans that were hard-frozen 

increased from 9.5 percent at the end of the 2003 plan year to 12.1 percent 

at the end of the 2004 plan year and to a preliminary 14.1 percent at the end of 

the 2005 plan year. As shown in Table 1, the percentage of plans that were hardfrozen tended to decline with the size of the plan. In 2003, plans with fewer than 

100 participants, which accounted for almost two-thirds of all the single-employer 

plans insured by PBGC, were the most likely to be hard-frozen. However, in 2004 

and 2005, plans with 100 to 999 participants were the most likely to be hard-frozen. 

Preliminary 2005 data indicate about one of six plans in this size stratum, which 

accounted for 25 percent of the single-employer plans insured by PBGC, were 

hard-frozen at the end of the plan year. At the other extreme, only about four 

percent of plans with 5,000 or more participants were hard-frozen in 2005, 

according to the preliminary results. These large plans accounted for less than 

four percent of insured plans. 

Table 1. Percentage of PBGC-Insured Single-Employer Plans That Had a

 Hard Freeze in Place, by Plan Size, 2003-2005

Plan Size

Percent Frozen Percent Change in Percentage

2003 2004 2005 2003-4 2004-5 2003-5

Less than 100 10.3% 12.6% 14.2% 22.9% 12.6% 38.4%

100 - 999 9.7 13.2 16.7 35.7 26.4 71.5

1,000 - 4,999 6.0 8.4 10.7 40.3 27.5 78.9

5,000 - 9,999 2.3 3.7 5.2 58.3 40.4 122.3

10,000 or more 1.8 2.0 2.9 12.4 42.3 60.0

All Plans 9.5% 12.1% 14.1% 26.8% 16.8% 48.1%
4 Results of This Study

Participants in Hard-Frozen Plans

Because most hard-frozen plans were small plans, the percentage of participants 

affected by hard freezes was relatively small, growing from 2.5 percent at the end of 

2003 to a preliminary 6.1 percent at the end of 2005. Overall, the smaller the plan 

size, the greater the percentage of participants who were in frozen plans, as shown 

in Table 2. More than 18 percent of participants in plans with fewer than 100 

participants were in hard-frozen plans at the end of the 2005 plan year compared 

with only four percent of participants in plans with 10,000 or more participants.

The percentage of participants in frozen plans increased for all plan sizes. Except 

for the largest size group, the growth in the percentage of participants in frozen 

plans for each size stratum was quite similar to the growth in the percentage 

of plans that were hard-frozen. Because the largest size group is open-ended, 

freezing one or two very large sized plans can have a large impact on the percent of 

participants who are in hard-frozen plans. This is what happened in 2005. In 2003, 

the three largest hard-frozen plans had between 20,000 and 25,000 participants 

each. In 2004, the three largest hard-frozen plans had about 23,000, 35,000, and 

62,000 participants, respectively. At the end of 2005, Sears froze its two large plans 

for Sears and K-Mart employees. These two plans had almost 400,000 participants 

between them. At the end of the same year, Lucent Technologies hard-froze a 

plan that had an additional 125,000 frozen plan participants. These three plans 

accounted for most of the growth in the number of participants in hard-frozen plans 

for 2005. 

Table 2. Percentage of All Participants in Hard-Frozen PBGC-Insured

Single-Employer Plans, by Plan Size, 2003-2005 

Plan Size

Percent in Frozen Plans Percent Change in Percentage

2003 2004 2005 2003-4 2004-5 2003-5

Less than 100 12.6% 15.9% 18.3% 25.7% 14.9% 44.5%

100 – 999 9.3 12.6 15.8 36.3 24.8 70.2

1,000 - 4,999 5.7 8.0 10.6 40.5 31.5 84.7

5,000 - 9,999 2.5 4.0 5.6 61.3 39.6 125.2

10,000 or more 0.7 1.1 4.0 48.7 264.2 441.6

All Plans 2.5% 3.5% 6.1% 41.3% 77.1% 150.2%
Results of This Study 5

The average size of hard-frozen and unfrozen plans is comparable except for the 

largest sized plans, as shown in Table 3. Hard-frozen plans with between 5,000 and 

9,999 participants have about 400 more participants, on average, than do unfrozen 

plans. Among the plans with 10,000 or more participants, the average size of those 

that were hard-frozen was much smaller in 2003 and 2004 than the average size of 

unfrozen plans, but frozen plans were almost 50 percent larger in 2005. The three 

very large plans frozen by Sears and Lucent Technologies accounted for the large 

increase in the average size of these hard-frozen plans in 2005. 

Table 3. Average Size of Hard-Frozen and Unfrozen PBGC-Insured

Single-Employer Plans, by Plan Size, 2003-2005 

Type of Single-Employer Plan

The plans PBGC insures may base benefits on a percentage of the participant’s 

compensation, on a flat-dollar amount per year of service, or on a hybrid formula. 

During the period under study, there was much uncertainty about whether 

cash balance plans, the primary type of hybrid plan, met all the conditions to be 

considered a “qualified” plan.3 Because of this uncertainty, many defined benefit 

plans reported to be candidates for freezing by their sponsors were hybrid plans. 

However, as Table 4 shows, in all three years hybrid plans were the least likely 

of the three plan types to have been hard-frozen. The percentage of hybrid plans 

that were hard-frozen in each of the three years was only about 60 percent of the 

percentage of either pay-based or flat-dollar plans that had been hard-frozen.

3

 Title VII of the Pension Protection Act of 2006 (P.L. 109-280) clarified the qualification status of cash balance 

plans and other plans using hypothetical accounts that were created on or after June 29, 2005. The status of 

plans created earlier than this date was not resolved by this legislation. 

Plan Size

Frozen Plans Unfrozen Plans

2003 2004 2005 2003 2004 2005

Less than 100 24 25 24 19 19 18

100 – 999 333 334 335 350 351 358

1,000 - 4,999 2,133 2,141 2,186 2,237 2,243 2,217

5,000 - 9,999 7,459 7,570 7,496 7,092 7,054 7,018

10,000 or more 14,786 20,155 50,512 36,926 37,998 36,461

All Plans 285 327 502 1,192 1,247 1,260
6 Results of This Study

Table 4. PBGC-Insured Single-Employer Plans That Were Hard-Frozen, 

By Plan Type, 2003-2005

Note: The individual components of “Percent of All Plans” add to more than 100 percent primarily 

because a number of hybrid plans also reported being either a pay-based plan or a flat-dollar plan, 

resulting in some double counting. 

Funding Level of Frozen Plans

While funding levels of all PBGC-insured plans generally improved between 2003 

and 2005, hard-frozen plans continued to be more poorly funded than plans that 

had not been frozen. (See Table 5.) In 2003 nearly half the hard-frozen plans were 

less than 80 percent funded on a current liability basis compared with one-third of 

the unfrozen plans.4 In 2004, these percentages had fallen to a third and a sixth, 

respectively, and they fell slightly more in 2005. Unfrozen plans were nearly twice 

as likely as hard-frozen plans to be fully funded in all three years. 

Table 5. Current-Liability-Funded Ratios of Hard-Frozen and Unfrozen

Plans, 2003-2005

Note: Percents may not add to 100 percent because of rounding.

* The “Missing” plans did not provide sufficient information for their funded ratios to be calculated.

4

 This funded ratio divides the “current value of assets,” a market-based value, by current liabilities calculated 

using the actuary-selected interest rate from within the allowable corridor.

Type of Plan

2003 2004 2005

Percent 

HardFrozenPercent of 

All Plans

Percent 

HardFrozenPercent of 

All Plans

Percent 

HardFrozenPercent of 

All Plans

Pay-Based 8.9% 81.1% 11.6% 81.2% 13.5% 81.2%

Flat-Dollar 9.7 14.8 11.5 14.5 13.7 14.3

Hybrid 5.5 5.7 6.7 6.5 8.0 7.6

Not Reported 25.2 3.2 31.0 3.1 35.0 3.1

All Plans 9.5% 100.0% 12.1% 100.0% 14.1% 100.0%

Funded Ratio

2003 2004 2005

Frozen 

Plans

Unfrozen 

Plans

Frozen 

Plans

Unfrozen 

Plans

Frozen 

Plans

Unfrozen 

Plans

Less than 60 % 14.9% 8.2% 8.5% 4.5% 7.5% 4.0%

60 – 79 % 32.5 25.8 24.1 13.1 22.6 12.2

80 – 99 % 25.4 25.9 33.6 29.1 35.7 28.8

100 % or better 17.1 30.1 25.0 43.3 22.8 44.8

Missing * 10.1 10.1 8.9 10.0 11.4 10.3

Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Percent of All Plans 9.5 90.5 12.1 87.9 14.1 85.9
Results of This Study 7

Liabilities and Assets

Table 6 shows the percentage of the total assets and liabilities of all plans that 

were held by hard-frozen plans, broken down by plan size. As one might expect, the 

pattern across plan sizes for each of the three years generally followed the pattern 

of the percentage of plans that were hard-frozen for these three years. However, the 

percentages of both total assets and liabilities that were held by hard-frozen plans 

were less than the percentages of plans that were hard-frozen and the percentages 

of participants who were in hard-frozen plans. 

Table 3 indicated that, within each size stratum as measured by the number of 

participants in the plan, frozen and unfrozen plans were of roughly comparable 

plan size, except for the two largest size strata. Thus, the reason for the lower 

average asset and liability levels must lie elsewhere. There are a few possible 

explanations for this finding. First, no new benefits accrue in hard-frozen plans, so 

no contributions need to be made to cover new accruals. Over time, as benefits are 

paid, the levels of assets and liabilities in hard-frozen plans should decline. The 

asset and liability levels in ongoing plans are likely to either increase as active 

participants accrue additional benefits or remain relatively constant (although 

they could decline as well). Second, hard-frozen plans could be plans that provide 

benefits that are less generous than the average.5

 

Table 6. Percentage of All Plan Assets and Liabilities That Were Held in

Hard-Frozen PBGC-Insured Single-Employer Plans, by Plan Size, 2003-2005 

5 Because the Form 5500 does not have a plan’s benefit formula in an electronic form, the validity of this second 

point could not be tested.

Plan Size

Percent of All Assets in 

Frozen Plans

Percent of All Liabilities in 

Frozen Plans

2003 2004 2005 2003 2004 2005

Less than 100 7.2% 5.9% 6.9% 8.9% 7.6% 6.1%

100 – 999 7.1 9.3 12.2 7.7 10.1 13.4

1,000 - 4,999 3.9 5.3 7.1 4.1 5.9 8.0

5,000 - 9,999 1.4 2.7 3.6 1.0 3.1 4.1

10,000 or more 0.4 0.5 2.7 0.4 0.5 2.7

All Plans 1.3% 1.7% 3.8% 1.4% 1.9% 4.1%
8 Results of This Study

Sponsors of Multiple Plans

Companies sponsoring two or more plans represent about 6 percent of all companies 

sponsoring PBGC-insured single-employer plans.6 (See Table 7.) They sponsor 

about 15 percent of all single-employer plans insured by PBGC. These companies 

were more likely to have frozen a plan than were companies sponsoring only one 

plan (19 percent versus 12 percent in 2004). However, companies sponsoring 

multiple plans froze a smaller percentage of the plans they sponsored than did 

companies sponsoring only one plan (10 percent versus 12 percent in 2004). Of the 

companies sponsoring multiple plans, only about 25 percent of those that froze any 

of their plans had frozen all their plans. 

Table 7 Characteristics of Companies Sponsoring Only One PBGC-Insured SingleEmployer Plan and of Companies Sponsoring Multiple Plans, 2003-2005

Hard Frozen Plans by Industry

The percentage of plans that were hard-frozen increased over the 2003-2005 period 

for each major industry group (see Table 8). The greatest increase in the number

of hard-frozen plans over the two-year period occurred within the Services and 

Manufacturing sectors. The Finance, Insurance, and Real Estate sector had the 

third largest increase in the number of hard-frozen plans. The Retail Trade sector 

had the greatest percentage of plans that were hard-frozen in 2003 and 2004 but fell 

to second place behind the Manufacturing sector in 2005. 

6

 This figure is based on plans sponsored by companies with unique employer identification numbers (EINs). 

Some companies, especially controlled groups, have several different EINs. In this section, each unique EIN is 

assumed to represent a separate company. 

Percent of:

2003 2004 2005

One Plan

Multiple 

Plans One Plan

Multiple 

Plans One Plan

Multiple 

Plans

All Plans 84.3% 15.7% 85.0% 15.0% 85.8% 14.2%

All Frozen Plans 86.2 13.8 86.5 13.5 86.6 13.4

All Sponsors 93.5 6.5 93.7 6.3 94.2 5.8

Sponsor Plans 

That Are Frozen 9.7 8.4 12.3 10.2 14.2 13.3

Sponsors Freezing 

Any Plans 9.7 15.5 12.3 19.2 14.2 23.1

Sponsors Freezing 

All Plans 9.7 3.5 12.3 5.1 14.2 6.7
Results of This Study 9

Within the Manufacturing sector, nearly 25 percent of insured plans in the 

Fabricated Metal Products and Rubber and Plastics industries were hard-frozen at 

the end of the 2005 plan year. The greatest percentage increase in the proportion 

of plans that were hard-frozen occurred in the Motor Vehicle manufacturing sector. 

While the percent of plans in this industry that were hard-frozen more than doubled 

over the two-year period, the total percentage of Motor Vehicle plans that were 

hard-frozen was among the lowest for all industries in 2003 and remained among 

the lowest in 2005. 

Table 8. Percentage of PBGC-Insured Single-Employer Plans That Had a

Hard Freeze in Place, by Industry, 2003-2005

Industry 2003 2004 2005

Percent Change in Percentage

2003-2004 2004-2005 2003-2005

Agriculture, Mining, 

 and Construction 10.2% 13.3% 14.1% 30.7% 6.2% 38.8%

Manufacturing 11.5 14.9 17.9 30.4 19.7 56.1

 Chemicals and Allied 

 Products 7.6 9.8 13.2 29.9 34.5 74.7

 Fabricated Metal 

 Products 16.2 19.3 24.3 19.4 25.8 50.2

 Motor Vehicles 4.6 9.6 11.1 110.3 15.2 142.2

 Primary Metals 13.1 14.7 18.0 11.9 22.4 37.0

 Rubber and Plastics 12.9 19.0 23.4 46.6 23.1 80.4

 Petroleum 5.8 10.0 9.8 72.7 -2.0 69.3

 Other Manufacturing 11.0 14.6 17.1 32.9 17.0 55.5

Transportation and 

 Utilities 7.3 9.9 10.5 36.0 5.6 43.5

 Air Transportation 11.6 11.6 17.2 0.0 48.3 48.3

 Other Transportation 9.6 13.3 14.1 38.5 5.8 46.5

 Utilities 2.8 4.4 4.0 57.4 -10.6 40.8

Wholesale Trade 11.8 13.3 15.3 12.9 14.9 29.7

Retail Trade 12.6 15.6 16.2 24.0 3.8 28.7

Finance, Insurance, 

 and Real Estate 5.7 7.0 8.9 22.9 27.0 56.0

Services 8.9 11.5 13.9 29.0 20.5 55.4

All Sectors 9.5% 12.1% 14.1% 26.7% 16.8% 48.1%
10 Results of This Study

Collective Bargaining Status

Collectively bargained plans were less likely than non-bargained plans to be hardfrozen in any year under study. In 2003, only 7.4 percent of collectively bargained 

plans were hard-frozen compared with 9.8 percent of non-bargained plans. By 

2005, an additional 4.5 percent of the plans in each group had been hard-frozen, a 

somewhat surprising result. One would expect a smaller increase in the percentage 

of collectively bargained plans that were hard-frozen relative to that experienced 

by non-bargained plans because sponsors must negotiate with employee unions to 

make changes to collectively bargained plans, many negotiations only take place 

every 3-5 years, and employees tend to want to keep the benefits that were agreed 

to in the past. 

Decision to Terminate

According to the Form 5500, in 2003 sponsors had made a decision to terminate 

more than 20 percent of the hard-frozen plans and almost seven percent of the 

unfrozen plans. Both these percentages declined slightly in 2004 (to 19 percent and 

six percent, respectively) and then returned to the 2003 levels in 2005. Sponsors 

that hard-froze their plans during 2004 and 2005 were no more likely to have 

decided to terminate these plans than were sponsors who hard-froze their plans 

before 2004. 

Dynamics of the Change in the Percent of Hard-Frozen Plans

The universe of insured plans is not static. Each year new plans are created and 

existing plans terminate or merge with other plans. Some existing plans change the 

conditions under which they operate. In non-bargained plans, sponsors can make 

changes unilaterally. In bargained plans, the changes must be agreed to by the 

employees’ unions, unless the sponsor is in bankruptcy and the bankruptcy court 

changes the terms of the bargaining agreement.

Tables 1 through 8 are based on the number of plans that were reported as hardfrozen at the end of 2003, 2004, and 2005. Each year a number of new plans were 

reported to be hard-frozen and a number that were reported to be hard-frozen at the 

end of the previous year were “thawed.” (A thawed plan is one reported to be hardfrozen in one year but not in the following year.) Many thawed plans were plans 

that terminated or otherwise failed to file a Form 5500 using the same employer 

identification number or plan number as in the previous year. Other thawed plans 

remained active but changed their reported status to indicate they were no longer 

frozen. The analysis that follows looks exclusively at changes in the number of 

frozen plans between 2003 and 2004 because those are the only years for which 

Form 5500 hard-frozen plan data are available for essentially all insured singleemployer plans. 
Results of This Study 11

Dynamics of Increase by Plan Size: Table 9 shows the dynamics of the 

increase, by plan size, in the number of frozen plans during the 2004 plan year. 

The table shows that more than 600 of the 2,900 plans that reported being hardfrozen at the end of 2003 did not report being frozen at the end of the 2004 plan 

year (they had “thawed”). More than twice as many plans, almost 1,300, that were 

not reported to be hard-frozen at the end of the 2003 plan year were reported to 

be hard-frozen at the end of the 2004 plan year. (A few plans moved from one size 

category to another during 2004. The net change is shown for each size category.) 

Thus, there was much more “freeze activity” going on than the end of plan year 

numbers might suggest.

Table 9. Change in the Number of Hard-Frozen PBGC-Insured 

Single-Employer Plans, by Plan Size, 2003-2004 

Recent Freeze Activity, by Industry: This freeze activity is also apparent when 

one looks at changes across industries. (See table 10.) In all major industries, the 

number of plans that were newly hard-frozen in 2004 was at least 33 percent of the 

number of plans that were hard-frozen at the end of the 2003 plan year, and this 

ratio approached 50 percent in several major industries. On the other hand, at least 

one plan of every six in each major industry that was listed as hard-frozen at the 

end of the 2003 plan year was not so listed at the end of the 2004 plan year. Both 

the Manufacturing and Services industries experienced a net 225-plan increase 

during 2004 in the number of hard-frozen plans. There was a lot of freeze-related 

activity taking place during 2004, and preliminary results for 2005 indicate such 

activity continued into that year as well. 

Plan Size

Number 

Frozen At the 

End of 2003

Plan Size 

Change for 

2004 (Net)

Thawed 

During 2004

Frozen 

During 2004

Number 

Frozen At the 

End of 2004

Less than 100 2,065 52 559 882 2,440

100 – 999 696 -39 46 316 927

1,000 - 4,999 141 -11 7 72 195

5,000 - 9,999 12 0 0 7 19

10,000 or 

more 11 -2 1 4 12

Total 2,925 0 613 1,281 3,593
12 Results of This Study

Table 10. Number of Hard-Frozen PBGC-Insured Single-Employer Plans and Source of

Change, by Industry, 2003-2004

Thawed Plans: Of the plans that reported being frozen in 2003, 613 were not 

reported as frozen in 2004. Of these, 477 (more than 75 percent) did not file a 

2004 Form 5500. Although only 274 of these 477 plans indicated on their 2003 

Form 5500 that it was the final filing, all are treated as if they had terminated. 

(See Table 11.) In reality, some may have merged with another plan, others may 

have failed to file their 2004 Form 5500, and some may have filed under another 

employer identification number that could not be matched with the 2003 number. 

The remaining 136 thawed plans filed Form 5500s in both 2003 and 2004. Of these, 

52 indicated that the 2004 Form 5500 would be their final filing. Most of these 52 

Industry

Frozen End 

of 2003

Industry 

Changed in 

2004

Thawed 

During 

2004

Frozen 

During 

2004

Frozen End 

of 2004

Agriculture, Mining, 

 and Construction 266 2 58 124 334

Manufacturing 952 -3 159 387 1,177

 Chemicals and Allied 

 Products 54 0 14 27 67

 Fabricated Metal 

 Products 230 0 36 67 261

 Motor Vehicles 16 2 5 19 32

 Primary Metals 64 -1 15 18 66

 Rubber and Plastics 55 0 6 28 77

 Petroleum 7 0 1 6 12

 Other Manufacturing 526 -4 82 222 662

Transportation and 

 Utilities 78 5 18 37 102

 Air Transportation 8 0 1 1 8

 Other Transportation 59 5 15 28 77

 Utilities 11 0 2 8 17

Wholesale Trade 265 -3 65 92 289

Retail Trade 201 -3 40 77 235

Finance, Insurance, 

 and Real Estate 304 -2 81 151 372

Services 859 4 192 413 1,084

Total 2,925 0 613 1,281 3,593
Results of This Study 13

plans reported having no participants in 2004. Nine additional plans indicated 

on their 2004 filings that their sponsors had made the decision to terminate the 

plan. Upon examining a sample of the remaining 75 plans,7 40 percent were found 

to be hard-frozen even though the freeze was not reported in the 2004 feature 

codes. Twenty-four percent had a partial or soft freeze but were not hard-frozen. 

The remaining 36 percent were not frozen during either the 2003 or 2004 plan 

years, although one was hard-frozen effective January 1, 1999, and then unfrozen 

effective January 1, 2001, with benefit credits given for the two years the freeze 

had been in effect. These last two groups of thawed plans, representing 60 percent 

of the sampled plans, apparently erroneously reported being hard-frozen in 2003 

and corrected the error on their 2004 filings. (The 2003 frozen-plan feature code 

indicators for these plans were not revised based on these findings.)

Table 11. Hard-Frozen Plans in 2003 That Were Not Reported Hard Frozen

in 2004, by Reason

Reason Not Hard-Frozen at the End of 2004 Number

2004 Form 5500 Not Filed 477

2004 Form 5500 Filed, Not Reported to be Hard-Frozen 136

 2004 Reported to be The Last Filing Year 52 

 Decision Made to Terminate the Plan 9

 Plans Where Termination Decision Had Not Been Made 75

 Hard-Frozen, Although Not Reported to be in 2004* 30

 Partial or Soft Freeze, Not a Hard-Frozen Plan* 18

 Not Frozen in Any Way in 2003 or 2004* 27

Total 613

* Based on a sample of the 75 plans

Newly Frozen Plans: The Form 5500 data indicate that 1,281 plans were newly 

hard-frozen during 2004. This was more than four percent of all the singleemployer plans PBGC insured that year. These newly hard-frozen plans were 36 

percent of the 3,593 plans that were hard-frozen at the end of the 2004 plan year. 

Most of these newly hard-frozen plans—1,147—were plans for which 2003 and 2004 

Form 5500 data are available. The remaining 134 newly reported hard-frozen plans 

did not have matching 2003 Form 5500s. 

7

 The plan descriptions in the attachments to the Schedule Bs were examined for the 25 largest of the 

remaining 75 plans.
14 Results of This Study

The distribution of these newly hard-frozen plans by plan size is virtually identical 

to the distribution of plans that were hard-frozen before 2004. (See Table 12.) The 

newly hard-frozen plans were slightly more likely to be small plans and slightly less 

likely to be plans with 100-999 participants than were plans that were hard-frozen 

before 2004. However, on average, these newly hard-frozen plans were better 

funded on a current liability basis than were plans that had been frozen in earlier 

years. (See Table 13.)

Table 12. Number and Percent of PBGC-Insured Single-Employer Plans 

That Were Hard-Frozen During and Before the 2004 Plan Year, by Plan Size 

Note: Percents may not add to 100 percent because of rounding.

Table 13. Current Liability Funded Status of Plans Hard-Frozen During 

2004 and Earlier Years

* The “Missing” plans did not provide sufficient information for their funded ratios to be calculated.

Plan Size

Hard-Frozen 

During 2004 Percent

Hard-Frozen 

Before 2004 Percent

Less than 100 882 68.9% 1,558 67.4%

100 – 999 316 24.7 611 26.4

1,000 – 4,999 72 5.6 123 5.3

5,000 – 9,999 7 0.5 12 0.5

10,000 or more 4 0.3 8 0.3

Total 1,281 100.0% 2,312 100.0%

Funded Ratio

Frozen During 2004 Frozen Before 2004

Number Percent Number Percent

Less than 60 % 93 8.5% 378 16.3%

60 – 79 % 257 23.6 834 36.1

80 – 99 % 358 32.8 638 27.6

100 % or better 314 28.8 381 16.5

Missing* 69 6.3 81 3.5

Total 1,281 100.0% 2,312 100.0%
Conclusions 15

Conclusions

This analysis of the Form 5500 data indicates that the percentage of PBGC-insured 

plans that were hard-frozen increased from 9.5 percent at the end of 2003 to 12.1 

percent at the end of 2004, and it apparently continued to increase to an estimated 

14.1 percent at the end of the 2005 plan year. The vast majority of hard-frozen 

plans were small plans. Preliminary 2005 data indicate that only 6.1 percent of 

participants whose benefits PBGC insures were in hard-frozen plans. Press reports 

indicate several very large employers hard-froze their plans during 2006 and 2007, 

so the percentage of insured plans that are hard-frozen and the percentage of 

participants who are in such plans should continue to increase in later data. 

A hard freeze is the most onerous type of plan freeze. Freezing benefit accruals 

for participants who do not meet certain age, tenure, location, or job series 

conditions (partial freezes) and closing plans to new entrants (closed plans) are 

actions that diminish the value of defined benefit plans. Published reports indicate 

that a number of large companies have been implementing partial freezes (e.g., 

Chemical Financial Corporation, GM, Sun Trust Bank, WellPoint, and Whirlpool 

among others) or closing at least some of their plans to new entrants (e.g., Alcoa, 

DuPont, Ford, Lockheed Martin, Motorola, and Nissan among others). Combined 

with a growing number of plans that have been hard-frozen, these reported lesser 

freezes indicate the private sector defined benefit system is going through a period 

of transition. 

The desire to restructure benefits to better align them with benefits being offered by 

competitors is often the primary rationale sponsors give for freezing their defined 

benefit plan and replacing it with an (enhanced) defined contribution plan. Other 

rationales are a desire to have more predictable and less volatile accounting and 

contribution requirements, a desire to avoid administrative complexities caused by 

changes in pension law and accounting standards, and a desire to reduce long-term 

compensation costs.

Whether any of these recent freeze decisions will be reversed remains to be seen. 

Most analysts believe that once a company has taken and survived the employee 

morale hit that comes from freezing a plan, it has little incentive to unfreeze the 

plan. The evidence shows that few hard-frozen plans have been unfrozen to date. 

From PBGC’s perspective or from a company’s financial perspective, the freezing of 

benefit accruals has little short-term impact. Plans continue to pay premiums to 

PBGC based on the number of participants in the plan even though the companies’ 

workers (the active participants) are no longer accruing benefits. Companies with 

frozen plans still must make minimum required contributions to the plan and follow 

all other requirements under federal pension law. However, because the companies’ 

workers are not accruing new benefits that have to be funded, over time sponsors 

should find it somewhat easier to fully fund their underfunded frozen plans.
16 Conclusions

From a longer-term perspective, freezing plans and closing them to new entrants 

could have a significant impact on the defined benefit system. The data indicate 

that sponsors are more likely to have made a decision to terminate frozen plans 

than unfrozen plans. This, combined with the closing of the frozen plans to new 

entrants, even for those that do not terminate, suggests that the total number of 

insured participants will continue the recently observed downward trend. PBGC’s 

flat-rate premium income could decline if the rate of participant decline exceeds the 

increase in the average national wage, which is used to index PBGC’s flat premium 

rate. In any event, PBGC’s flat-rate premium revenue will be lower than it would 

have been had these plans not been frozen or closed to new entrants. If the funding 

levels of the frozen plans improve as a result of the freeze or closing them to new 

entrants, PBGC’s variable-rate premium income could also be reduced, making it 

more difficult for PBGC to recover from its current negative net financial position. 

At the same time, if the funding levels improve, PBGC’s anticipated future claims 

should also be smaller. 
Appendix 1 17

Appendix I: Recent Studies Related to Plan Freezes

Recent studies related to the freezing of defined benefit pension plans have fallen 

into one or more of three general categories—the percentage of plans that have been 

frozen or whose sponsors purportedly plan to enact a freeze in the next year or two, 

the rationales for why sponsors are freezing their plans, and the consequences of 

freezing a plan. 

Percent of Plans That Have Been Frozen

Relatively few new plan freeze studies have been published since the last report 

issued by PBGC (An Analysis of Frozen Defined Benefit Plans, December 2005). 

Those that are available have tended to focus on past and anticipated freeze 

activity by large companies. Some studies have restricted their sample to clients 

of companies that provide benefit consultant services. Others have restricted their 

sample to very large companies. None of the studies is based on a random sample 

of defined benefit plans or on data from the entire universe of defined benefit 

plans. These studies provide important insights into what is happening in certain 

segments of the defined benefit plan universe, but their results should not be 

interpreted as representing plan freeze activity in the defined benefit universe as a 

whole. 

Hewitt Associates conducts an annual survey of human resource professionals to 

determine their areas of focus and the actions their companies are likely to take for 

their defined contribution and defined benefit plans. The survey conducted at the 

end of 2006 obtained responses from 146 employers (Hewitt Associates, January 

2007).8

 Of the 66 percent of employers who maintained a defined benefit plan, 

four percent had hard-frozen at least one of their plans and an additional 31 percent 

had closed at least one of their plans to new hires. An additional four percent said 

they were very likely to freeze one or more of their plans in the short term. 

Harper, Strand and Tucker (February 2007) reported that a recent study of Fortune 

200 companies by Mercer Human Resources found that approximately 20 percent 

had either frozen their plans or closed them to new entrants. However, less than 

10 percent had hard-frozen their plans. 

8

 No information is provided on the number of plans these companies sponsor. Only six percent of these 

responses (nine companies) were from employers with fewer than 1,000 U.S. employees. In contrast, 88 percent 

of the plans insured by PBGC have fewer than 1,000 participants. This raises the question of whether their 

results are applicable to the universe of plans PBGC insures. 
18 Appendix 1

The Pension Management Research Panel (September 2006) reported that, of 139 

U.S. companies and 163 Canadian companies responding to a Pension Management 

Research Panel “Quick Poll,” six percent reported they had plans that were 

currently frozen, an additional 27 percent had closed their plans to new entrants, 

two percent were in the process of terminating their plans, and 23 percent were 

planning to make changes to their plans. Of those planning to make changes, 

almost a third (29 percent) anticipated closing, freezing, or terminating their plans 

by the end of 2007. More than a third of the U.S. companies that had closed a plan 

to new entrants but not frozen it at the time of the survey indicated they anticipated 

freezing the plan by the end of 2007. Overall, U.S. companies were somewhat more 

likely to have frozen or closed a plan (39 percent) than were Canadian companies 

(30 percent). 

Towers Perrin (September 2006) surveyed major employers immediately after 

Congress passed the Pension Protection Act of 2006 (PPA). Of the 126 companies 

that responded, 11 percent had already frozen their largest pension plan and an 

additional 24 percent had closed theirs to new hires. Five percent of companies 

whose plans had not been frozen or closed said they intend to freeze their plan as a 

result of PPA’s enactment.

Watson Wyatt (July 2007) reported that the number of Fortune 1000 companies 

that had either frozen or terminated one or more defined benefit plans increased 

from 113 in 2006 to 138 in 2007. While the number of companies freezing their 

plans continued to increase, the rate at which they were freezing their plans 

declined. In their July 2006 study, Watson Wyatt reported that 48 of the 113 

companies with frozen or terminated plans continued to sponsor defined benefit 

plans that had not been frozen. In most cases, these 48 companies froze or 

terminated the plans for salaried employees and maintained the active plans for 

unionized workers.

Jack VanDerhei (July 2007) analyzed the 162 responses from an EBRI/Mercer 

survey of Mercer’s retirement business contact list clients. Twenty-eight percent 

of these companies had either closed or frozen a defined benefit plan within the 

previous two years and another 16 percent expected to do so within the next two 

years. Thirteen percent of these companies had frozen a plan in the last two years. 

The survey did not ascertain how many companies had frozen plans prior to the 

two-year period or what percent of the plans they sponsored were frozen at the time 

of the survey.

The range of results, from four percent of sponsors freezing at least one plan 

(Hewitt) to 13 percent freezing a plan in the past two years (VanDerhei), is wide, 

given that most of the companies in the various studies were large companies. 

The freeze definition is generally not stated in these studies and, in the case of 

the Watson Wyatt study, is combined with plan terminations. Study results 

may be different, in part, because of the differences in freeze definitions. The 
Appendix 1 19

studies generally stated how many companies responded to the survey but not 

how many were in the original sample. Thus, how well the responding companies 

represented the population from which the original sample was drawn is unknown. 

If companies that had frozen their plan were more likely to respond to the survey 

than those that did not, then there will be an upward response bias in the reported 

results. In addition, many of these companies sponsor more than one plan, but the 

studies do not state how many of their plans were frozen. Unless the companies 

that freeze at least one plan freeze all their plans, the percentage of plans that 

are frozen will be smaller than the number of companies freezing at least one of 

their plans. The bottom line is that results of these studies should generally not be 

viewed as representative of what is happening among all defined benefit plans. 

Reasons Plans Were Frozen

Several studies indicated a sponsor’s primary motivation for freezing its pension 

plans is to eliminate or reduce costs (Aon, October 2003; McIlvaine, May 2006; 

Mercer, February 2006; Nordstrom, September 2006; and Pension Management 

Research Panel, September 2006). Indeed, Watson Wyatt (July 2006) indicates 

that, until 2005, plans that were frozen had relatively low funding ratios and the 

sponsoring companies were usually in financial distress. In a study of 15 Standard 

& Poor 500 companies that indicated an intention to freeze their defined benefit 

plans, Mercer found that these companies faced higher contribution requirements 

as a percentage of revenues or operating cash flows than other S&P 500 companies 

sponsoring defined benefit plans (February 2006). It also found plans were more 

likely to be frozen when the plan was large relative to the size of the company or 

where company profit margins were thin. 

A second primary reason for freezing plans listed by the above studies is to reduce 

cost and accounting expense volatility. Other primary motivators in the above 

studies included the influence of the companies’ boards, the realization of the 

inherent risks from holding plan assets in equities, and the unpredictability of 

future contribution and accounting requirements. Nordstrom also pointed out that 

the recent decision of several corporate icons with well-funded plans to freeze their 

plans has acted as a catalyst to get other companies to review freezing as an option 

and to motivate some to freeze their plans. 

The EBRI/Mercer survey asked how important a number of factors were in the 

decision to freeze a plan (Nordstrom (June 2007) and VanDerhei (July 2007)). 

There, the most important reason for freezing a plan was as part of the company’s 

overall benefit restructuring strategy. Other important reasons were the impacts of 

PPA provisions, accounting rule changes promulgated by the Financial Accounting 

Standards Board, competitive pressures, and younger workers’ lack of interest in 

defined benefit plans.
20 Appendix 1

Munnell, Golub-Sass, Soto, and Vitagliano (March 2006) proposed four reasons 

why companies freeze their pension plans. The reasons, which are not based on 

survey data, include: companies’ desire to reduce labor costs in the face of global 

competition; the desire to restrict the growth in total benefit costs by reducing 

pension costs to offset rapidly growing health benefit costs; the recognition that 

market risk, longevity risk, and regulatory risk impose a potential cost burden on 

the company that it may not be willing to bear over the long term; and separation 

of upper management’s retirement income system from that of the rank and file has 

resulted in the devaluation of traditional pensions in the eyes of management.

Consequences of Freezing a Plan

While concerns about plan costs and contribution and pension expense volatility 

are primary motivations for freezing a plan, freezing a plan has only a modest 

immediate impact on these variables (Harper et al, February 2007; McIlvaine, May 

2006; Morgan, May 2006; and Nordstrom, September 2006). Hard-freezing a plan 

eliminates future benefit accruals, but the company continues to have an obligation 

to fund existing and future shortfalls as well as to comply with the day-to-day 

administrative, compliance, and fiduciary responsibilities. These responsibilities 

include funding the plan, paying PBGC premiums, filing the Form 5500, and 

following all other requirements under federal pension law. Plan investments may 

be restructured to better match assets and liabilities. A fully funded frozen plan 

receives little advantage from high risk/high return investments because there are 

no new accruals to cover and any excess assets will be subject to a 50 percent excise 

tax at termination (Rubin, 2007). 

Freezing a plan does not affect the level of benefits plan participants have accrued 

at the time of the freeze. Retired participants and separated vested participants 

will receive all the benefits they were expecting and entitled to under the terms of 

the plan. Active participants will receive all the benefits they had earned but not 

all the benefits they were expecting. And the difference between what they will 

actually receive, even if the company enrolls them in an enhanced 401(k) plan, and 

what they had expected to earn for a full career under the defined benefit plan can 

be substantial (Munnell et al, March 2006). Workers in their 50s when the freeze 

occurred who contributed six percent of salary to the 401(k) plan (with a three 

percent employer match) could receive a combined defined benefit/401(k) benefit 

that was one-third smaller than what they would have received if the defined 

benefit plan had not been frozen. 

VanDerhei (March 2006) shows there is tremendous variability in what it would 

take to financially indemnify active participants for a plan freeze. The variability 

depends on the worker’s age, salary, job tenure, years to retirement, type of defined 

benefit plan, plan characteristics, and underlying economic assumptions. Older and 
Appendix 1 21

longer-tenured workers tend to be more affected because they do not have as much 

time left in their working careers to make 401(k) contributions to offset the accrual 

loss from a pension freeze. To maintain their expected retirement income and 

retirement age, they may have to contribute 15-20 percent of annual pay (or more) 

to their 401(k) plan. 

Freezing a defined benefit plan can make it more difficult to manage the company’s 

workforce. The company may find the freeze negatively affects employee morale 

and productivity. It loses the ability to provide early retirement windows by 

enhancing retirement benefits that can be funded over time. It may also find that 

older workers determine they cannot afford to retire and so remain on the job, 

blocking the advancement of younger workers who may be more productive. 
22 Bibliography

Bibliography

American Academy of Actuaries. Enrolled Actuaries Report, “GAO Studies Frozen 

Plans,” pages 5-6, Spring 2004.

Aon Consulting. 2003. “Aon Study: Pension plan freezes moving to forefront; more 

possible without changes to funding rules.” Press release. October 29, 2003.

Ehrhardt, John W., Adrien R. LaBombarde, and Paul C. Morgan. “The return to 

full funding (almost).” Milliman, Inc., 2007.

Harper, Erica, Annette Strand, and J. Scott Tucker. “Pension plans: Frozen, but 

not forgotten.” A Mercer Perspective on Retirement. Mercer Human Resource 

Consulting, New York, NY, February 2007. 

Hewitt Associates LLC. “Survey Findings—Current Retirement Plan Challenges: 

Employer Perspectives, 2003.” Lincolnshire, IL, December 2003.

Ibid. “Survey Findings: Hot Topics In Retirement, 2005.” Lincolnshire, IL, January 

2005. 

Ibid. “Survey Findings: Hot Topics In Retirement, 2007.” Lincolnshire, IL, 

January 2007.

Kanter, Maurissa, and Kristen Polich. “Hewitt Survey Reveals New Employer 

Trends in Retirement.” Hewitt Associates, LLC. Lincolnshire, IL, January 10, 

2006.

Ibid. “Hewitt Survey Reveals New Employer Trends in Retirement.” Hewitt 

Associates, LLC. Lincolnshire, IL, February 1, 2007.

Mathew Greenwald and Associates, Inc. “Society of Actuaries’ Survey on the 

Prevalence of Traditional and Hybrid Defined Benefit Pension Plans: Report of 

Findings,” March 2005.

McIlvaine, Andrew R. “The Freeze Factor.” Entrust Group, Inc. May 2, 2006.

Mercer Human Resources Consulting. “Coping with the Economy: Survey on 

Retirement Programs.” January 4, 2004.

Ibid. “A Closer Look at Recent High-Profile Pension Plan Freezes.” Update. 

February 27, 2006.
Bibliography 23

Morgan, Curt. “Frozen DB Plans Are Not Necessarily Low Maintenance.” HRO 

Today. May 2006.

Munnell, Alicia H., Franscesa Golub-Sass, Mauricio Soto, and Francis Vitagliano. 

“Why are Healthy Employers Freezing Their Pensions?,” Issue in Brief Number 44, 

Center for Retirement Research at Boston College, March 2006.

Nordstrom, Bruce R. “U.S. Retirement Perspective: Freezing pension plans: The 

cold, hard facts on a hot topic.” Mercer Human Resource Consulting. September 5, 

2006. 

Ibid. “Pension Protection Act of 2006: The other shoe is about to drop.” Perspective, 

Issue 13. Mercer Human Resource Consulting. June 2007. 

Pension Benefit Guaranty Corporation. An Analysis of Frozen Defined Benefit 

Plans. Washington, DC: Pension Benefit Guaranty Corporation, December 21, 

2005.

Pension Management Research Panel Quick Poll. “The Future of Pensions: 

Companies Changing How Plans are Managed to Address Growing Complexity.” 

SEI Investments Management Corp. September 2006.

Rubin, Jordan. “The Impact of Pension Freezes on Firm Value.” Wharton Research 

Scholars Journal. Wharton School, University of Pennsylvania, 2007. 

Towers Perrin HR Services, “Back to the Future: Redefining Retirement in the 21st 

Century,” The 2003 Retirement Study, 2004. 

Ibid. “Managing Employee Benefits Globally: Today’s increasingly disciplined 

approach,” Worldwide Benefits Management Survey, November 2004.

Ibid. “The Pension Protection Act of 2006: Expected Impact on Retirement Plan 

Financing—And How Employers Are Likely To Respond.” September 2006.

VanDerhei, Jack. “Pension Freezes: Who’s Affected and by How Much?” EBRI 

Issue Brief No. 291. Employee Benefit Research Institute, March 2006.

 

Ibid. “Retirement Income Adequacy After PPA and FAS 158: Part One—Plan 

Sponsors’ Reactions.” EBRI Issue Brief No. 307. Employee Benefit Research 

Institute, July 2007.

Watson Wyatt Worldwide press release, “More Companies Froze, Terminated 

Pension Plans in 2004, Watson Wyatt Analysis Finds,” June 22, 2005.
24 Bibliography

Ibid. “More FORTUNE 1000 Plan Sponsors Freezing Their Defined Benefit Plans.” 

Watson Wyatt Worldwide. July 2006.

Ibid. “Pension Plan Freezes Slowing, Watson Wyatt Finds.” Watson Wyatt 

Worldwide Press Release. July 23, 2007.

Pension Benefit Guaranty Corporation

1200 K Street NW, Washington DC 20005-4026

www.pbgc.gov