An Analysis of Frozen Defined Benefit Plans

Pension Benefit Guaranty Corporation

December 21, 2005
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An Analysis of Frozen Defined Benefit Plans

Summary

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.

Background

Traditional defined benefit pension plans, based on years of service and either final

salary or a flat-dollar benefit formula, provide a stable source of retirement income

to supplement Social Security. The number of private-sector defined benefit plans

reached a peak of 112,000 in the mid-1980s. At that time, about one-third of

American workers were covered by defined benefit plans. The number of plans now

stands at about 30,000.

In recent years, many employers have chosen not to adopt defined benefit plans,

and others have chosen to terminate their existing defined benefit plans. From 1986

to 2004, 101,000 single-employer plans with about 7.5 million participants were

terminated. In about 99,000 of these terminations, the plans had enough assets to

purchase annuities in the private sector to cover all benefits earned by workers and

retirees (a “standard termination”). In the remaining 2,000 cases, companies with

underfunded plans shifted their pension liabilities to the PBGC.
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In contrast to the dramatic reduction in the total number of plans, the total number

of participants in PBGC-insured single-employer plans has increased. In 1980,

there were about 28 million covered participants; by 2004 this number had

increased to about 35 million. However, these numbers mask the downward trend

in the defined benefit system because they include not only active workers but also

retirees, surviving spouses and separated vested participants. The latter three

categories reflect past coverage patterns in defined benefit plans. A better forwardlooking measure is the trend in the number of active participants, who continue to

accrue benefits. That number is moving downward. In 1985, there were about 22

million active participants in single-employer defined benefit plans. By 2002, the

number had declined to 17 million. At the same time, the number of inactive

participants has been growing. In 1985, inactive participants accounted for only 28

percent of total participants in single-employer defined benefit plans, a number that

has grown to about 50 percent today. 

Plan terminations are one reason for the decline in active participants. Plan freezes

are another. Some plans are frozen because the sponsor falls on hard economic

times and decides to temporarily freeze its plans to reduce the contributions it is

required to pay into them. Other plans are frozen because the sponsor wants to

cover its workers under a defined contribution or hybrid plan and does not want to

terminate or convert the old plan. Still others are frozen after one company acquires

another, and the plans of the two companies cannot easily be merged. 

As noted, a plan can be frozen in several ways. It can be closed to new entrants so

that only those in the plan at a point in time continue to accrue benefits. The plan

can be frozen for some, but not all, participants. Such a partial freeze could be based

on age, tenure, job classification or plant location. Under a hard freeze, no

participant accrues any further benefits based on either job tenure or compensation

growth. Under a soft freeze, benefits are generally not increased for additional

tenure but are increased for compensation growth. 

Available Studies on Plan Freezes

The decline in the equities markets starting in 2000 and the continued longer-term

decline in interest rates have combined with other factors to reduce funding levels

in many plans. A number of these plans have become so underfunded that their

sponsors are required to make relatively high minimum contributions to bring

funding back up to acceptable levels. Reports from benefit consulting firms suggest

that the sponsors of many underfunded plans would like to terminate their plans

but cannot afford to purchase annuities from a private-sector insurer to cover

benefits. These reports also indicate that many sponsors have taken actions, or are

thinking about taking actions, to reduce the burdens of their plans by closing them

to new entrants or freezing accruals for some or all active participants.
 Aon press release, “Aon Study: Pension plan freezes moving to forefront; more possible without changes to 1

funding rules,” October 29, 2003.

 Aon is conducting a follow-up study but is still gathering data at this time. 2

 Mercer Human Resources Consulting, “Coping with the Economy: Survey on retirement programs,” no date 3

but cited in a Mercer Investment Consulting press release, “US employers look to reduce retirement plan costs,”

January 22, 2004.

 American Academy of Actuaries, Enrolled Actuaries Report, “GAO Studies Frozen Plans,” pages 5-6, Spring 4

2004.

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A number of benefit consulting firms and actuarial organizations conducted studies

from 2003 through 2005 that touched on the frozen plan issue. These studies all

have shortcomings, however. Those conducted by the consulting firms are generally

based solely on a review of plans serviced by the consultant. Those by the actuarial

organizations are more broadly based but response rates are low and respondents

are self-selected.

None of the studies are based on a random sample of all plans or on data available

from all plans. This means the results cannot be projected to the entire population

of plans or to the plans insured by PBGC. In addition, the definition of “freeze”

varies across these studies, and, when reporting results, the studies tend to

combine frozen plans with plans with other characteristics such as plans whose

sponsors are considering a freeze or plans that have terminated. This makes it

difficult to determine how many plans were frozen at a point in time and difficult to

compare the results of the various studies. Also, the studies do not report why the

freeze was implemented.

The most often cited study of frozen plans was released by the Aon Corporation in

the fall of 2003. Aon’s actuaries looked at more than 1,000 private-sector defined 1

benefit client plans and found that 15 percent of the plans were frozen to one degree

or another. It also reported that the sponsors of another 6 percent of plans were

actively considering freezing their plan. Neither the level of freeze nor the year the

freeze was implemented was specified for the plans that were frozen, and there has

been no published follow-up to determine if the sponsors who were considering

freezing their plans actually did so. 

2

In January 2004, Mercer Human Resources Consulting reported the results of a

study that looked at changes in plan characteristics over the past three years for

170 client plans. The study found that 6.5 percent of the plans had been frozen 3

during the previous three years, 6 percent had been closed to new entrants, 9

percent would be frozen within the following six months, and a freeze was under

consideration by another 6 percent. The study did not report on the extent of the

freeze for the frozen plans or how many plans might have been frozen before the 3-

year look-back period. Again, there has been no follow-up report on whether the

planned freezes actually occurred.

In 2003, the American Academy of Actuaries asked its members to report on the

extent of freezes in client plans.4 The Academy received voluntary responses from
 Towers Perrin HR Services, “Back to the Future: Redefining Retirement in the 21 Century, The 2003 5 st

Retirement Study” and “Managing Employee Benefits Globally: Today’s increasingly disciplined approach,”

Worldwide Benefits Management Survey, November 2004.

 Hewitt Associates LLC, “Survey Findings—Current Retirement Plan Challenges: Employer Perspectives, 6

2003,” December 2003, and “Survey Findings: Hot Topics in Retirement, 2005,” January 2005.

 Mathew Greenwald and Associates, Inc., “Society of Actuaries’ Survey on the Prevalence of Traditional and 7

Hybrid Defined Benefit Pension Plans: Report of Findings,” March 2005.

 The freeze definition used was a “hard freeze.”

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 Watson Wyatt Worldwide press release, “More Companies Froze, Terminated Pension Plans in 2004, Watson 9

Wyatt Analysis Finds,” June 22, 2005.

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232 Enrolled Actuaries who worked on 4,659 mostly small plans. Of these plans, 9

percent were frozen prior to 2000, 11 percent since 2000 and 7 percent were closed

to new entrants. Sponsors of 8 percent were considering freezing their plans. The

extent of the freeze was not reported.

Towers Perrin conducted studies in 2003 and 2004 that included questions about

plan freezes, but the Towers analysts combined frozen plans with plans having

other characteristics when reporting their results. In the 2003 study, for example, 5

they reported that 27 percent of sponsors had either frozen their plan, were

considering freezing their plan, or had either reduced plan benefits or were

planning to reduce benefits. The 2004 benefits study of 134 leading multinational

corporations (only 42 percent of which were headquartered in North America) found

that 20 percent had frozen or eliminated their pension plans and 12 percent

expected to take one of these two actions within the next 12 to 18 months.

Hewitt Associates looked at the plans of about 200 large companies in 2003 and

2004. However, the focus of the studies was on companies that were considering 6

freezing their plans or closing them to new entrants. The Hewitt studies did not

report the percentage of plans that had already been frozen. 

In March 2005, the Society of Actuaries published the results of a survey conducted

for them by Mathew Greenwald and Associates in September 2004. The survey,

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which was sent to the 2,500 employers in the United States with the largest work

forces, contained some information on plan freezes. Only 342 employers responded

and 100 of these were public sector organizations. Of these 342 employers, 264

sponsored one or more defined benefit pension plans. Seventy of the sponsors (27

percent) had frozen at least one plan. However, 66 of these 70 employers continued 8

to sponsor at least one ongoing defined benefit plan. The study did not differentiate

between frozen plans in the private versus public sector. It reported that 5 percent

of the active participants in the private-sector plans and 3 percent of those in the

public-sector plans were in plans that had been frozen.

More recently, Watson Wyatt released the results of a study on the status of defined

benefit plans in the Fortune 1000 companies for 2001 through 2004. The study

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found that the percentage of companies with a frozen or terminated plan increased

from 5 percent (34 plans) in 2001 to 11 percent (71 plans) in 2004. The study did not
 In 2005, the PBGC began receiving information about plan freezes implemented during the reporting year

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from the reports that plan sponsors file with the agency under section 4010 of ERISA. However, not all plan

sponsors are required to file such reports—in 2004, for example, only 1,108 plans out of roughly 30,000 filed

with the PBGC. In addition, the plans that file do not represent a random sample of the defined benefit pension

universe; therefore, the results regarding plan freezes cannot be extrapolated to the system as a whole. With

that said, the section 4010 filings received by the PBGC for 2004 indicated that sponsors of about 8 percent of

the reporting plans had either frozen benefit accruals to some degree or closed the plan to new entrants during

the reporting period.

 The data on the number of plans and participants presented in the following pages will differ slightly from the 11

2003 numbers in PBGC’s “Pension Insurance Data Book.” The source of the “Data Book” plan and participant

numbers is PBGC’s premium filings, not the Form 5500s. Differences in filing due dates, processing times, and

definitions of participants are the primary sources of these slight disparities.

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indicate (1) how this percentage was distributed between frozen and terminated

plans; (2) when the frozen plans were frozen; (3) what type of freeze was being

measured; or (4) whether all, or just some, of the plans of an individual company

were frozen or terminated. 

PBGC Analysis of the Form 5500 Data10

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

plans are required to file annually with the IRS, the Department of Labor, and the

PBGC. This new question requires defined benefit pension plans to indicate 11

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. However,

processing problems for this question on the 2002 Form 5500s limited the

usefulness of the frozen plan data for this year. 

The value of the Form 5500 frozen-plan question is somewhat limited in the current

context because not all plan freezes are hard freezes. A plan closed to new entrants

that 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

participants but not all (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, at the moment, there are no data available that can be

used to determine how common they actually are.

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

5500 data to become available to federal agencies. As a result, 2003 is the latest

year for which complete Form 5500 data are available. At the moment, completed

2003 Form 5500 filings are available for more than 95 percent of the PBGC-insured

single-employer plans. The data presented in the following section are based on the

available 2003 data. 
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Results

Plan size

More than 9 percent of PBGC-insured single-employer plans (more than

2,700 of the 29,000 plans for which 2003 data are available) were hard-frozen

in 2003. As shown in Table 1, small plans were more likely to be frozen than

larger plans. Ten percent of plans with fewer than 1,000 participants were

hard-frozen. The percentage of frozen plans decreased as the size of the plan

increased. Only 2 percent of the plans with 5,000 or more participants were

hard-frozen.

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

Place in 2003, by Plan Size

Plan Size Percent Hard-Frozen Group’s Percentage of All Plans

Less than 100 10.1 65.2

100 – 999 9.5 23.4

1,000 – 4,999 6.2 7.7

5,000 or more 2.2 3.6

Total Percent 9.4 100.0

Participants in hard-frozen plans

The percentage of participants in hard-frozen plans, 2.5 percent, is

substantially smaller than the percentage of plans that are frozen. (See Table

2.) This is understandable given that small plans are more than four times as

likely to be hard-frozen as large plans. As with the percentage of frozen

plans, the percentage of participants in frozen plans declines as plan size

increases. More than 12 percent of participants in plans with fewer than 100

participants were in hard-frozen plans, but only 1 percent of participants in

large plans of 5,000 or more participants had their benefit accruals frozen.

The percentage of active participants who are in hard-frozen plans (less than

2 percent) is even smaller than the percentage of all participants in these

plans. This could be due to an accounting anomaly. Once a plan is frozen, the

plan’s administrator might no longer consider the company’s employees to be

active participants. The administrator might count them as separated vested

participants instead. On the other hand, if the sponsor froze the plan because

of financial hardship, it might very well have implemented a reduction-inforce, which would move active participants into the separated vested
 Most hybrid plans were created by converting a traditional defined benefit plan to a hybrid plan. In many 12

converted Cash Balance plans, the benefits that had been accrued under the traditional plans were converted to

an opening account balance for the Cash Balance plan. All benefits will be paid from these accounts. In other

Cash Balance plans, the benefits accrued under the traditional plans were frozen and the Cash Balance

accounts began with a $0 balance. The benefits that will be paid from these plans will combine the frozen

benefits from the traditional plans and the account balances from the Cash Balance plans. Even though the

benefits from the traditional component of these plans were frozen, the active participants continue to accrue

benefits from the Cash Balance component, so these plans should not be characterized as frozen plans.

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participant category. While not shown in the table, about one-third of the

participants in frozen plans are listed as active participants and 40 percent

as separated vested participants. In plans that are not frozen, about half the

participants are reported to be active participants and 25 percent as

separated vested participants.

Table 2. Percentage of All Participants and All Active Participants in Hard-Frozen

PBGC-Insured Single-Employer Plans in 2003, by Plan Size 

Plan Size Percent of All Participants

Percent of All Active

Participants

Less than 100 12.5 8.1

100 – 999 9.1 6.5

1,000 – 4,999 6.2 3.7

5,000 or more 1.0 0.7

Total Percent 2.5 1.8

Type of single-employer plan

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

participants’ compensation or on a flat-dollar amount, or they may be hybrid

plans. Currently there is much uncertainty about whether Cash Balance

plans, the primary type of hybrid plan, meet all the conditions to be judged a

“qualified” plan. Many of the plans rumored to be frozen or whose sponsors

are rumored to be considering freezing their plans are hybrid plans. Table 3

shows that, in 2003, hybrid plans were less likely to have been hard-frozen (6

percent) than either pay-based plans (9 percent) or flat-dollar plans (10

percent). The uncertainty that surrounds hybrid plans has not yet resulted 12

in a strong move toward freezing them. Sponsors of hybrid plans appear to be

adopting a wait-and-see-what-the-Congress-will-do attitude.
 Current liabilities are a proxy for the plan’s accrued liabilities at a point in time. They are generally smaller 13

than the plan’s termination liabilities, a measure of what it would cost the sponsor to close out the plan by

purchasing annuities for all participants. Because the liabilities are the denominator in the funded ratio, a

smaller measure of liabilities will yield a higher reported funded ratio. Thus, a plan’s current-liability-funded

ratio will generally be higher than its termination-funded ratio.

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Table 3. PBGC-Insured Single-Employer Plans With a Hard Freeze in 2003, by Type of

Plan

Type of Plan Percent Hard-Frozen Group’s Percentage of All Plans

Pay-Based 8.8 80.9 

Flat-Dollar 9.6 15.0 

Hybrid 5.7 5.8

Not Reported 24.9 3.2

Total 9.4 100.0 

Note 1: Group’s Percentages add to more than 100 percent (104.9 percent) primarily because a number of

plans reported being both a hybrid plan and also either a pay-based or flat-dollar plan.

Note 2: The percentage of plans that were hybrid plans in 2003 is higher here than reported in the “Pension

Insurance Data Book 2004" because the “Data Book’s” numbers are based on conditions at the

beginning of 2003. The data in Table 3 are, for the most part, based on conditions at the end of

2003.

Funding level of frozen plans 

On average, frozen plans are less well funded than unfrozen plans. Table 4

compares the current-liability-funded status of frozen and unfrozen plans.13

Almost half the frozen plans, but only a third of the unfrozen plans, had

current-liability-funded ratios of less than 80 percent. Another quarter of

each type of plan was between 80 and 100 percent funded on a current

liability basis. Because plans are almost always better funded on a current

liability basis than on a termination basis, it is safe to assume that in 2003

more than 75 percent of the frozen plans and more than 60 percent of

unfrozen plans were underfunded on a termination basis.

The poor funded condition of many of the frozen plans would appear to

provide credible support for the notion that sponsors of many frozen plans

would like to terminate them but cannot currently afford to do so. Indeed,

more than 20 percent of the frozen plans reported in 2003 that a decision had

been made to terminate them. Such a termination decision was reported for

only 7 percent of the unfrozen plans. Certainly, for many of these

underfunded plans, it would be very costly for the sponsor to make a

contribution large enough to close the plan out with a standard termination.

Nevertheless, while a large percentage of frozen plans were underfunded in

2003, one cannot necessarily conclude that the majority of the sponsors of
 Sponsors may be reluctant to terminate a frozen plan that is significantly overfunded because the asset 14

reversion tax would prevent them from recovering a substantial portion of the plan’s surplus assets.

9

frozen plans actually want to terminate these plans. Plans are frozen for a

variety of reasons, and sponsors may find certain advantages to maintaining

a frozen plan, even if it is fully funded on a termination basis.14

Table 4. Current-Liability-Funded Ratios of Frozen and Unfrozen Plans, 2003

Funded Ratio Frozen Plans Unfrozen Plans

Less than 60 percent 15.0 8.3

60 – 79 percent 33.1 26.6

80 – 99 percent 25.2 26.0

100 percent or better 16.6 28.9

Missing 10.1 10.1

Total 100.0 100.0 

Percent of All Plans 9.4 90.6

As shown in Table 5, small frozen plans were more likely than larger plans to

be very poorly funded. Almost 20 percent of small plans were less than 60

percent funded on a current liability basis, whereas less than 10 percent of

larger plans were this poorly funded. However, another 20 percent of small

frozen plans were very well funded and had assets that at least equaled the

plans’ current liabilities. A smaller percentage of the larger plans were this

well funded. (Small plans have fewer reporting requirements than larger

plans and were much more likely to be missing the data needed to determine

their funded ratios.)

Table 5. Percent of Frozen Plans, by Funded Ratio and Plan Size, 2003

Funded Ratio

Plan Size

Less than 100 100 – 999 1,000 – 4,999 5,000 or more

Less than 60% 17.4 10.1 5.0 8.7

60 – 79% 26.8 46.0 57.9 47.8

80 – 99% 22.4 33.2 27.9 21.7

100% or better 19.6 9.2 8.6 17.4 

Missing 13.7 1.6 0.7 4.3

 Total 100.0 100.0 100.0 100.0 

 Percent of All

Frozen Plans 70.4 23.6 5.1 0.8
 This figure is based on plans sponsored by unique employer identification numbers (EINs). Some companies, 15

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

represent a separate company.

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Sponsors of multiple plans

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

companies sponsoring PBGC-insured single-employer plans. (See Table 6.) 15

These companies sponsor about 15 percent of the single-employer plans

PBGC insures. Companies sponsoring multiple plans are more likely to have

hard-frozen at least one of their plans than are companies that sponsor only

one plan (15 percent versus 10 percent). However, a smaller percentage of

plans of these multiple plan sponsors have been frozen (8 percent) than plans

of sponsors of only one plan (10 percent). Among those sponsors of multiple

plans that froze at least one plan, two-thirds froze only one plan while 25

percent (but just 4 percent of all multiple plan sponsors) froze all the plans

the company sponsored. 

Table 6. Characteristics of Companies That Sponsor Only One PBGC-Insured SingleEmployer Plan and Companies That Sponsor Multiple Plans, 2003 

Percent of: Sponsors of

One Plan

Sponsors of Multiple

Plans

All sponsors 93.6 6.4

All plans 84.6 15.4

All frozen plans 86.5 13.5

Sponsors’ plans that are frozen 9.6 8.2

Sponsors freezing any plans 9.6 15.0

Sponsors freezing only one plan 9.6 9.7

Sponsors freezing all plans 9.6 3.6

Industry

Certain industries are more likely to have hard-frozen plans than others, as

shown in Table 7. Plans in the Fabricated Metal Products (16%), Apparel and

Textile Products (16%), Rubber and Plastics (12%), Primary Metals (12%),

and Retail Trade (12%) industries are the most likely to be hard-frozen. 

Plans in the Utilities (3%), Motor Vehicles (5%), and Finance, Insurance and

Real Estate (6%) industries are the least likely to be hard-frozen. 
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Table 7. Percentage of PBGC-Insured Single-Employer Plans That Had a Hard Freeze

in Place in 2003, by Industry

Industry Percent Hard-Frozen Industry’s Percentage of

All Plans

Agriculture, Mining and 

 Construction 9.1 8.4

Manufacturing 10.1 26.9

 Apparel and Textile Products 15.9 1.0

 Chemicals and Allied Products 7.6 2.3

 Fabricated Metal Products 16.1 4.6

 Food and Tobacco Products 8.5 2.4

 Machinery and Computer Equip. 12 3.3

 Motor Vehicles 4.6 1.1

 Primary Metals 12.3 1.6

 Rubber and Plastics 12.4 1.4

 Other Manufacturing 10.2 9.2

Transportation and Public

 Utilities 7.2 3.6 

 Air Transportation 12.1 0.2

 Other Transportation 9.5 2 

 Public Utilities 2.7 1.3

Wholesale Trade 11.8 7.2

Retail Trade 12.3 5.1

Finance, Insurance and

 Real Estate 5.6 17.4

Services 8.9 31.4

Total 9.4 100 

Collective bargaining status

One would suppose that collectively bargained plans are much less likely to

be frozen because either the negotiating employees’ group must agree to the

freeze or the sponsor must be in bankruptcy and receive permission from the

bankruptcy court to freeze the plan. However, the 2003 Form 5500 data

suggest this is not the case as far as hard-frozen plans are concerned. Seven

percent of the collectively bargained plans were hard-frozen compared with

10 percent of the non-collectively bargained plans. 
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Conclusions

The data indicate that almost one out of every ten single-employer pension plans

insured by PBGC were hard-frozen as of the 2003 plan year. Most of the hard-frozen

plans are small plans. Only 2.5 percent of all participants and fewer than 2 percent

of the active participants in all PBGC-insured single-employer plans are affected by

these hard freezes. 

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

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

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 are still required to make the minimum required contributions to the

plan. Because the companies’ workers are not accruing new benefits that have to be

funded, over time it should be somewhat easier for the sponsors of underfunded

frozen plans to fully fund their plans.

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

could have a significant effect 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 growth rate for total insured

participants will slow or perhaps even reverse itself. This will cause PBGC’s flatrate premium income to be less than it would be if the plans had not been frozen or

closed to new entrants. If the funding levels of the frozen plans improve, the

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.

PBGC’s anticipated claims should also be smaller because of the improved funding

in these plans, however.

The findings of this study show that the significant changes taking place in the

defined benefit system are more widespread than indicated by the long-term and

continuing decline in the number of defined benefit plans. And even the results of

this study do not show the full extent of the decline in the defined benefit system. 

While we know that nearly 10 percent of the remaining PBGC-insured plans were

hard-frozen as of 2003, an unknown number of additional plans have been frozen to

a lesser degree or closed to new entrants, and these numbers have almost certainly

increased in the past two years.