Report to Congressional Requesters

United States Government Accountability Office

GAO 

DEFINED BENEFIT 

PENSIONS 

Survey Results of the 

Nation’s Largest 

Private Defined 

Benefit Plan Sponsors 

March 2009 

GAO-09-291 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

March 2009

DEFINED BENEFIT PENSIONS 

Survey Results of the Nation’s Largest Private 

Defined Benefit Plan Sponsors

Highlights of GAO-09-291, a report to 

congressional requesters 

GAO’s survey of the largest sponsors of DB pension plans revealed that 

respondents have made a number of revisions to their retirement benefit 

offerings over the last 10 years or so. Generally speaking, they have changed 

benefit formulas; converted to hybrid plans (such plans are legally DB plans, 

but they contain certain features that resemble DC plans); or frozen some of 

their plans. Eighty-one percent of responding sponsors reported that they 

modified the formula for computing benefits for one or more of their DB 

plans. Among all plans reported by respondents, 28 percent of these (or 47 of 

169) plans were under a plan freeze—an amendment to the plan to limit some 

or all future pension accruals for some or all plan participants. The vast 

majority of respondents (90 percent, or 38 of 42 respondents) reported on 

their 401(k)-type DC plans. Regarding these DC plans, a majority of 

respondents reported either an increase or no change to the employer or 

employee contribution rates, with roughly equal responses to both categories. 

About 67 percent of (or 28 of 42) responding firms plan to implement or have 

already implemented an automatic enrollment feature to one or more of their 

DC plans. With respect to health care offerings, all of the (42) responding 

firms offered health care to their current workers. Eighty percent (or 33 of 41 

respondents) offered a retiree health care plan to at least some current 

workers, although 20 percent of (or 8 of 41) respondents reported that retiree 

health benefits were to be fully paid by retirees. Further, 46 percent of (or 19 

of 41) responding firms reported that it is no longer offered to employees 

hired after a certain date. 

At the time of the survey, most sponsors reported no plans to revise plan 

formulas, freeze or terminate plans, or convert to hybrid plans before 2012. 

When asked about the influence of recent legislation or changes to the rules 

for pension accounting and reporting, responding firms generally indicated 

these were not significant factors in their benefit decisions. Finally, a 

minority of sponsors said they would consider forming a new DB plan. Those 

sponsors that would consider forming a new plan might do so if there were 

reduced unpredictability or volatility in DB plan funding requirements and 

greater scope in accounting for DB plans on corporate balance sheets. The 

survey results suggest that the long-time stability of larger DB plans is now 

vulnerable to the broader trends of eroding retirement security. The current 

market turmoil appears likely to exacerbate this trend. 

The number of private defined 

benefit (DB) pension plans, an 

important source of retirement 

income for millions of Americans, 

has declined substantially over the 

past two decades. For example, 

about 92,000 single-employer DB 

plans existed in 1990, compared to 

just under 29,000 single-employer 

plans today. Although this decline 

has been concentrated among 

smaller plans, there is a widespread 

concern that large DB plans 

covering many participants have 

modified, reduced, or otherwise 

frozen plan benefits in recent years. 

GAO was asked to examine (1) 

what changes employers have 

made to their pension and benefit 

offerings, including to their defined 

contribution (DC) plans and health 

offerings over the last 10 years or 

so, and (2) what changes 

employers might make with respect 

to their pensions in the future, and 

how these changes might be 

influenced by changes in pension 

law and other factors. 

To gather information about overall 

changes in pension and health 

benefit offerings, GAO asked 94 of 

the nation’s largest DB plan 

sponsors to participate in a survey; 

44 of these sponsors responded. 

These respondents represent about 

one-quarter of the total liabilities in 

the nation’s single-employer 

insured DB plan system as of 2004. 

The survey was largely completed 

prior to the current financial 

market difficulties of late 2008.

View GAO-09-291 or key components.

For more information, contact Barbara 

Bovbjerg at (202) 512-7215 or 

bovbjergb@gao.gov. 
Contents 

Letter 1

From January 1997 to the Time of the Survey Response, Large 

Sponsors of DB Plans Have Revised Their Benefit Offerings in 

Various Ways 4

At the Time of the Survey, Large DB Sponsors Anticipated Making 

Few Additional Changes to DB Plans 11 

Conclusions 14 

Agency Comments 14 

Appendix I Survey Results of the Nation’s Largest Private DB 

Plan Sponsors 16 

Appendix II Scope and Methodology 56 

Appendix III GAO Contact and Staff Acknowledgments 60 

Page i GAO-09-291 Defined Benefit Pensions 
Abbreviations 

DB defined benefit 

DC defined contribution 

CUSIP Committee on Uniform Securities Identification Procedures 

ERISA Employee Retirement Income Security Act of 1974 

EIN Employee Identification Number 

FAS Financial Accounting Standard 

FASB Financial Accounting Standards Board 

HRA health reimbursement arrangement 

HSA health savings account 

MMA Medicare Prescription Drug, Improvement, and 

 Modernization Act of 2003 

PBGC Pension Benefit Guaranty Corporation 

PPA Pension Protection Act of 2006 

This is a work of the U.S. government and is not subject to copyright protection in the 

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without further permission from GAO. However, because this work may contain 

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necessary if you wish to reproduce this material separately. 

Page ii GAO-09-291 Defined Benefit Pensions 
United States Government Accountability Office

Washington, DC 20548 

 

March 30, 2009 

The Honorable Charles E. Schumer 

Vice Chairman 

Joint Economic Committee 

United States Senate 

The Honorable Robert P. Casey, Jr. 

United States Senate 

The number of private defined-benefit (DB) pension plans, an important 

source of retirement income for millions of Americans, has declined 

substantially over the past two decades.1

 For example, about 92,000 singleemployer DB plans existed in 1990 compared to just under 29,000 singleemployer plans today. At the same time, the number of definedcontribution (DC) pension plans, such as 401(k)-type plans, has grown 

dramatically and resulted in a shift from DB plans to DC plans. For 

example, as of 2006, the Department of Labor estimates that there are 2.3 

participants in a single-employer DC plan for each participant in a singleemployer DB plan. One consequence of this shift from DB to DC plans is a 

shift of risk and responsibility to individual employees and away from the 

plan sponsors. In contrast to this overall trend, more large DB plans, or 

plans with more than 5,000 participants, exist today than did in 1990.2

Despite the relative resilience of these large plans, there is widespread 

concern that sponsors of these plans have frozen or otherwise modified 

plan benefits.3

 Additionally, over the last few years, these plan sponsors 

have had to deal with a very dynamic environment for pensions—

especially with respect to pension legislation, changes to pension-related 

accounting rules, and a now rapidly worsening financial environment. 

 

1

Employers may sponsor defined benefit (DB) or defined contribution (DC) plans for their 

employees. DB plans promise to provide a benefit that is generally based on an employee’s 

salary and years of service. 29 U.S.C. § 1002(35). DB plans use a formula to determine the 

ultimate pension benefit participants are entitled to receive. Under a DC plan, such as a 

401(k) plan, employees have individual accounts to which the employee, employer, or both 

make contributions, and benefits are based on contributions, along with investment returns 

(gains and losses) on the accounts. 29 U.S.C. § 1002(34). 

2

See Pension Benefit Guaranty Corporation, Pension Insurance Data Book 2007, Number 

12 (Washington, D.C.,Winter 2008), page 70. 

3

See GAO, Defined Benefit Pensions: Plan Freezes Affect Millions of Participants and 

May Pose Retirement Income Challenges, GAO-08-817 (Washington, D.C.: July 21, 2008). 

Page 1 GAO-09-291 Defined Benefit Pensions 
 

Employers have also been wrestling with higher health care costs and 

making a number of changes to health benefit offerings. For example, 

many employers that offer health benefits have required workers to pay a 

higher share of out-of-pocket costs, and some have recently introduced 

consumer-directed health plans, which trade lower premiums for 

significantly higher deductibles.4

 Similar to coverage for active workers, an 

increasing share of retiree health benefits costs is being shifted to retirees 

and many employers have terminated benefits for future retirees—a trend 

that experts believe will continue. 

Plan sponsors have also had to react to changes in the legislation 

governing plan funding and sponsorship and in accounting rules 

determining how pension assets and liabilities should be publicly reported. 

The current financial market turmoil has also led to additional stress on 

many plan sponsors. For example, a benefit consulting group recently 

estimated that the recent stock downturn has left DB pension plans at the 

nation’s largest companies underfunded by $409 billion—erasing an 

estimated $60 billion pension surplus at year-end 2007. On average, these 

large firms’ pension assets were only able to cover 75 percent of their 

obligations, down from the estimated 104 percent a year prior. 

To better understand what has happened in the last decade or so, and 

what may happen in the future to pension plans as indicated by the actions 

of large DB sponsors, you asked us to address 

(1) what changes employers have made to their pension and benefit 

offerings, including to their DC plans and health offerings, over the last 

10 years or so, and 

(2) what changes employers might make with respect to their pensions in 

the future, and how these changes might be influenced by changes in 

pension law and other factors. 

 

4

The most common tax-advantaged savings arrangements that enrollees can use to pay for 

a portion of their health expenses are health reimbursement arrangements (HRA) or health 

savings accounts (HSA). These accounts allow funds to accrue over time. HRA accounts 

are owned by the employer, and only the employer may contribute to them. HSAs are 

owned by the enrollee and, therefore, are portable when workers change jobs. Both 

employers and enrollees can make contributions to HSAs. See GAO, Employer Sponsored 

Health and Retirement Benefits: Efforts to Control Employer Costs and the Implication 

for Workers, GAO-07-355 (Washington, D.C.: Mar. 30, 2007). 

Page 2 GAO-09-291 Defined Benefit Pensions 
 

To determine the status of sponsors’ current benefit offerings, as well as 

possible prospective changes to pension offerings in the context of the 

current legal and regulatory environment, we developed, pretested, and 

administered an original survey of large DB plan sponsors. Additionally we 

analyzed and reviewed other employer studies and reviewed related 

literature. Appendix I contains revised slides that update the preliminary 

briefing information that we provided to your staff, as well as to officials 

from the Pension Benefit Guaranty Corporation (PBGC), the Department 

of Labor, and the Department of the Treasury in February 2009. 

To achieve our survey objectives, we developed and pretested a 

questionnaire that we sent to the largest DB pension sponsors from 

PBGC’s 2004 Form 5500 Research Database. We further limited our study 

population to those sponsors that were also listed on either the Fortune 

500 or Global 500 lists. We administered the survey to the 94 largest 

sponsors (by total participants in all sponsored plans) for which we were 

able to obtain information for the firm representative who would be most 

knowledgeable on pension and benefits issues. While 94 firms we 

identified for the survey do not represent a statistically generalizable 

sample of the roughly 23,500 total DB plan sponsors we identified in the 

Form 5500 Research Database, we estimate that these 94 sponsors 

represented 50 percent of the total liabilities and 39 percent of the total 

participants (active, retired, and separated-vested) in the PBGC insured 

single-employer DB system as of 2004. Given their relative significance, the 

94 sponsors, by themselves, represent an important share of the DB 

system. Among the 44 plan sponsors that ultimately responded to the 

survey, we estimate that these sponsors represent 25 percent of the total 

liabilities and 19 percent in the single-employer DB system as of 2004 (see 

app. I, slide 5). Further, the responding sponsors represented a diversity of 

industries such as manufacturing; information; finance or insurance; and 

other various industries (see app. I, slide 7). Additionally, responding firms 

reported employing, on average, 75,000 employees in their U.S. operations 

in 2006. 

The survey was administered as a Web-based survey that was available for 

access from December 17, 2007, to October 31, 2008. The vast majority of 

respondents completed the survey at least a few months prior to the 

recent financial downturn. Our analysis is unlikely to capture any related 

trends. 

Page 3 GAO-09-291 Defined Benefit Pensions 
 

We initiated our audit work in April 2006. We issued results from our 

survey regarding frozen plans in July 2008.5

 We completed our audit work 

for this report in March 2009 in accordance with all sections of GAO’s 

Quality Assurance Framework that are relevant to our objectives. The 

framework requires that we plan and perform the engagement to obtain 

sufficient and appropriate evidence to meet our stated objectives and to 

discuss any limitations in our work. We believe that the information and 

data obtained, and the analysis conducted, provide a reasonable basis for 

any findings and conclusions. 

See appendix II for a more detailed discussion about our methodology. 

Our survey of the largest sponsors of DB pension plans reveals that they 

have made a number of revisions to their benefit offerings over 

approximately the last 10 years or so. Generally, respondents reported that 

they revised benefit formulas, converted some plans to hybrid plans (such 

as cash balance plans),6

 or froze some of their plans. For example, 81 

percent7

 of responding sponsors reported that they modified the formulas 

of one or more of their DB plans. 

Respondents were asked to report changes for plans or benefits that 

covered only nonbargaining employees, as well as to report on plans or 

benefits that covered bargaining unit employees. Fifty-eight percent8

 of 

respondents who reported on plans for collective- bargaining employees 

From January 1997 to 

the Time of the 

Survey Response, 

Large Sponsors of DB 

Plans Have Revised 

Their Benefit 

Offerings in Various 

Ways 

 

5

We previously used a portion of this survey to analyze frozen plan tendencies, which used 

a stratified random probability sample of 471 DB pension sponsors from PBGC’s 2004 Form 

5500 Research Database. See GAO-08-817. 

6

Cash balance plans are referred to as hybrid plans because, legally, they are DB plans but 

contain certain features that resemble DC plans. Similar to traditional DB plans, cash 

balance plans use a formula to determine pension benefits. However, unlike traditional 

final average pay plans that pay retirement benefits on the basis of an annuity amount 

calculated using years of service and earnings, cash balance plans express benefits as a 

hypothetical individual account balance that is based on pay credits (percentage of salary 

or compensation) and interest credits, rather than an annuity. 

7

Or 34 of 42 respondents that answered this question for either their plans covering 

nonbargaining employees only or their plans covering collectively bargained employees. All 

results in this report are unweighted. For example, results reported on a respondent basis 

are not additionally weighted by another factor such as plan liabilities or the number of 

participants in the responding sponsors’ plans. 

8

Or 14 of 24 respondents that answered the question for their plans covering collectively 

collective-bargaining employees. 

Page 4 GAO-09-291 Defined Benefit Pensions 
 

indicated they had generally increased the generosity of their DB plan 

formulas between January 1997 and the time of their response (see app. I, 

slide 12). In contrast, 48 percent9

 of respondents reporting on plans for 

their nonbargaining employees had generally decreased the generosity of 

their DB plan formulas since 1997.10 “Unpredictability or volatility of DB 

plan funding requirements” was the key reason cited for having changed 

the benefit formulas of plans covering nonbargaining employees (see app. 

I, slide 14).11 “Global or domestic competitive pressures” in their industry 

was the key reason cited for the changes to the plans covering collectively 

bargained employees (see app. I, slide 13).12 With regard to plans for 

bargaining employees, however, a number of the sponsors who offered 

reasons for changes to bargaining unit plans also volunteered an 

additional reason for having modified their plans covering bargaining 

employees. Specifically, these sponsors wrote that inflation or a cost-ofliving adjustment was a key reason for their increase to the formula. This 

suggests that such plans were flat-benefit plans13 that may have a benefit 

structure that was increased annually as part of a bargaining agreement. 

Meanwhile, sponsors were far more likely to report that they had 

converted a DB plan covering nonbargaining unit employees to a hybrid 

plan design than to have converted DB plans covering collectively 

 

9

Or 19 of 40 respondents that answered the question for their plans covering nonbargaining 

employees only. 

10Respondents may be responding for both questions relating to plans covering 

nonbargaining unit employees only and questions relating to plans covering bargaining unit 

employees. For the question relating to DB formula changes, 24 respondents answered 

both questions. 

11This reason was most common, both among those reporting a change and among only 

those respondents reporting a formula decrease. 

12See appendix II for an explanation of the difference between collectively bargained plans 

and collectively bargained employees. 

13A flat-benefit plan uses a formula multiplying a beneficiary’s months of service by a 

predetermined, flat, monthly rate. This contrasts with the more typical unit credit plan, 

which typically uses a formula multiplying a beneficiary’s years of service by a percentage 

of his or her salary. Flat-benefit plans are more common in collectively bargained plans 

where the range of monthly wages between employees is comparatively small. Because, 

typically, an employee’s wages often increase over time, flat-benefit plans are amended, 

usually in conjunction with a new collective-bargaining agreement, by raising the monthly 

rate. As such, a cost-of-living adjustment for an employee with a pension using a flatbenefit formula may be thought of as analogous to a wage increases that may be witnessed 

by an employee with a pension using a unit credit formula. 

Page 5 GAO-09-291 Defined Benefit Pensions 
 

bargained employees. For example, 52 percent14 of respondents who 

reported on plans for nonbargaining unit employees had converted one or 

more of their traditional plans to a cash balance or other hybrid 

arrangement (see app. I, slide 15). Many cited “trends in employee 

demographics” as the top reason for doing so (see app. I, slide 16). Among 

respondents who answered the cash balance conversion question for their 

collectively bargained plans, 21 percent15 reported converting one or more 

of their traditional plans to a cash balance plan. 

Regarding plan freezes, 62 percent16 of the responding firms reported a 

freeze, or a plan amendment to limit some or all future pension accruals 

for some or all plan participants, for one or more of their plans (see app. I, 

slide 18). Looking at the respondent’s plans in total, 8 percent of the plans17

were described as hard frozen, meaning that all current employees who 

participate in the plan receive no additional benefit accruals after the 

effective date of the freeze, and that employees hired after the freeze are 

ineligible to participate in the plan. Twenty percent18 of respondents’ plans 

were described as being under a soft freeze, partial freeze, or “other” 

freeze.19 Although not statistically generalizable, the prevalence of freezes 

among the large sponsor plans in this survey is generally consistent with 

the prevalence of plan freezes found among large sponsors through a 

previous GAO survey that was statistically representative.20

 

14Or 21 of 40 respondents that answered the question for their plans covering nonbargaining employees only. 

15Or 5 of 24 respondents that answered the question for their plans covering collectivebargaining employees. 

16Or 26 of 42 respondents that answered the question. 

17Or 14 plans as hard frozen, among the 169 total plans reported by 42 respondents. 

18Or 33 plans as soft, partial, or other freeze, among the 169 total plans reported by 42 

respondents. 

19A soft freeze is a freeze that limits future benefit accruals based on a component of the 

benefit accrual formula (that is, the service or salary component), and at a minimum, 

closes the plan to new participants. A partial freeze is a freeze that closes the plan to new 

entrants and, for only a subset of active participants, the plan’s prospective benefit formula 

is changed to limit or cease future benefit accruals. 

20See GAO 08-817. Many of the large sponsors in the GAO Survey of Large Defined Benefit 

Sponsors were included as a subset of sponsors in the Survey of Plan Freezes. 

Page 6 GAO-09-291 Defined Benefit Pensions 
 

The vast majority of respondents (90 percent)21 to our most recent survey 

also reported on their 401(k)-type DC plans. At the time of this survey, 

very few respondents reported having reduced employer or employee 

contribution rates for these plans. The vast majority reported either an 

increase or no change to the employer or employee contribution rates, 

with generally as many reporting increases to contributions as reporting 

no change (see app. I, slide 21). The differences reported in contributions 

by bargaining status of the covered employees were not pronounced. 

Many (67 percent)22 of responding firms plan to implement or have already 

implemented an automatic enrollment feature to one or more of their DC 

plans. 

According to an analysis by the Congressional Research Service, many DC 

plans require that workers voluntarily enroll and elect contribution levels, 

but a growing number of DC plans automatically enroll workers. 

Additionally, certain DC plans with an automatic enrollment feature may 

gradually escalate the amount of the workers’ contributions on a recurring 

basis. However, the Pension Protection Act of 2006 (PPA) provided 

incentives to initiate automatic enrollment for those plan sponsors that 

may not have already adopted an automatic enrollment feature.23 Seventytwo percent24 of respondents reported that they were using or planning to 

use automatic enrollment for their 401(k) plans covering nonbargaining 

 

21Or 38 of 42 respondents that answered 401(k)-related questions for either their plans 

covering nonbargaining employees only or their plans covering collectively bargained 

employees. 

22Or 28 of 42 respondents that answered the automatic enrollment question for either their 

plans covering only nonbargaining employees or their plans covering collectively bargained 

employees. 

23See Congressional Research Service, Automatic Enrollment in 401(k) Plans, RS21954 

(Washington, D.C., Jan. 16, 2007). The PPA amended the Employee Retirement Income 

Security Act of 1974 (ERISA) to provide that under default investment arrangements that 

provide participants with required notice, employers and other plan fiduciaries will not be 

held liable for losses to the same extent as if a participant had exercised control of the 

investment. PPA § 624, 120 Stat. 980. The law also provided that automatic contribution 

arrangements that provide automatic deferral of pay, matching or nonelective 

contributions, and notice to employees will be deemed to meet the nondiscrimination 

requirements of the Internal Revenue Code. PPA §§ 902(a), 120 Stat. 1033-35. It also 

provided that plans consisting solely of contributions made through automatic enrollment 

will not be considered top-heavy plans. PPA § 902(c), 120 Stat. 1036. 

24Or 28 of 39 respondents that answered the question for their plans covering nonbargaining employees only. 

Page 7 GAO-09-291 Defined Benefit Pensions 
 

employees, while 46 percent25 indicated that they were currently doing so 

or planning to do so for their plans covering collective-bargaining 

employees (see app. I, slide 22). The difference in automatic enrollment 

adoption by bargaining status may be due to the fact that nonbargaining 

employees may have greater dependence on DC benefits. That is, a few 

sponsors noted they currently automatically enroll employees who may no 

longer receive a DB plan. Alternatively, automatic enrollment policies for 

plans covering collective-bargaining employees may not yet have been 

adopted, as that plan feature may be subject to later bargaining. 

Health benefits are a large component of employer offered benefits. As 

changes to the employee benefits package may not be limited to pensions, 

we examined the provision of health benefits to active workers, as well as 

to current and future retirees. We asked firms to report selected nonwage 

compensation costs or postemployment benefit expenses for the year 2006 

as a percentage of base pay. Averaging these costs among all those 

respondents reporting such costs, we found that health care comprised the 

single largest benefit cost. Active employee health plans and retiree health 

plans combined to represent 15 percent of base pay26 (see app. I, slide 24). 

DB and DC pension costs were also significant, representing about 14 

percent of base pay.27 All of the respondents28 reporting on health benefits 

offered a health care plan to active employees and contributed to at least a 

portion of the cost. Additionally, all of these respondents provided health 

benefits to some current retirees, and nearly all were providing health 

benefits to retirees under the age of 65 and to retirees aged 65 and older. 

Eighty percent29 of respondents offered retiree health benefits to at least 

some future retirees (current employees who could eventually become 

eligible for retiree benefits), although 20 percent30 of respondents offered 

 

25Or 11 of 24 respondents that answered the question for their plans covering collectivebargaining employees. 

26Twenty-five respondents reported their firm’s percent of base pay devoted to active 

employee health plans, and 25 respondents reported their firm’s percent of base pay 

devoted to retiree health plans. 

27Twenty-five respondents reported their firm’s percent of base pay devoted to DB plans, 

and 25 respondents reported their firm’s percent of base pay devoted to DC plans. 

28Or 42 of the 42 respondents that answered the questions. 

29Or 33 of the 41 respondents that offered a retiree health benefit to at least some current 

employees. 

30Or 8 of the 41 respondents that offered a retiree health benefit to at least some current 

employees. 

Page 8 GAO-09-291 Defined Benefit Pensions 
 

retiree health benefits that were fully paid by the retiree.31 Further, it 

appears that, for new employees among the firms in our survey, a retiree 

health benefit may be an increasingly unlikely offering in the future, as 46 

percent32 of responding firms reported that retiree health care was no 

longer to be offered to employees hired after a certain date (see app. I, 

slide 25). 

We asked respondents to report on how an employer’s share of providing 

retiree health benefits had changed over the last 10 years or so for current 

retirees. Results among respondents generally did not vary by the 

bargaining status of the covered employees (app. I, slide 27). However, 27 

percent33 of respondents reporting on their retiree health benefits for plans 

covering nonbargaining retirees reported increasing an employer’s share 

of costs, while only 13 percent34 of respondents reporting on their retiree 

health benefits for retirees from collective-bargaining units indicated such 

an increase. Among those respondents with health benefits covering 

nonbargained retirees, they listed “large increases in the cost of health 

insurance coverage for retirees” as a major reason for increasing an 

employer’s share—not surprisingly. This top reason was the same for all of 

these respondents, as well as just those respondents reporting a decrease 

in the cost of an employer’s share.35 Additionally, a number of respondents 

who mentioned “other” reasons for the decrease in costs for employers 

cited the implementation of predefined cost caps.36

 

31These figures are not necessarily mutually exclusive. The very same respondents could 

answer multiple questions about features of their current retiree health offering or 

offerings. 

32Or 19 of the 41 respondents that offered a retiree health benefit to at least some current 

employees. 

33Or 11 of 40 respondents that answered the question for their plans covering 

nonbargaining employees only. 

34Or 3 of 23 respondents that answered the question for their plans covering collectivebargaining employees. 

35We do not report selected reasons for respondents reporting for their collectively 

bargained employees, as the response rate for the question was not robust. 

36A cost cap is a limitation placed on an employer’s share of costs. A few firms specifically 

cited Financial Accounting Standard (FAS) 106 as the impetus for the cap. FAS 106 outlines 

accounting practices for postretirement benefits other than pensions, which includes 

health plans. 

Page 9 GAO-09-291 Defined Benefit Pensions 
 

Our survey also asked respondents to report on their changes to retiree 

health offerings for future retirees or current workers who may eventually 

qualify for postretirement health benefits. As noted earlier, 46 percent of 

respondents reported they currently offered no retiree health benefits to 

active employees (i.e., current workers) hired after a certain date. 

Reporting on changes for the last decade, 54 percent37 of respondents 

describing their health plans for nonbargaining future retirees indicated 

that they had decreased or eliminated the firm’s share of the cost of 

providing health benefits (see app. I, slide 30).38 A smaller percentage (41 

percent)39 of respondents reporting on their health benefits for collectively 

bargained future retirees indicated a decrease or elimination of benefits. 

The need to “match or maintain parity with competitor’s benefits package” 

was the key reason for making the retiree health benefit change for future 

retirees among respondents reporting on their collective-bargaining 

employees (app. I, slide 32). 

We asked respondents to report their total, future liability (i.e., present 

value in dollars) for retiree health as of 2004.40 As of the end of the 2004 

plan year, 29 respondents reported a total retiree health liability of $68 

billion. The retiree health liability reported by our survey respondents 

represents 40 percent of the $174 billion in DB liabilities that we estimate 

for these respondents’ DB plans as of 2004. According to our estimates, the 

DB liabilities for respondents reporting a retiree health liability were 

 

37Or 21 of 39 respondents that answered the question for their plans covering 

nonbargaining employees only. 

38These respondents indicated that “large cost increases in health insurance for retirees” 

and “large cost increases in health insurance for active employees” were the major reasons 

for the change to benefits (app. I, slide 31). Interestingly, these reasons were ranked as top 

reasons for respondents that specifically reported an increase in an employer’s share of the 

cost, as well as those that specifically reported a decrease. 

39Or 9 of 22 respondents that answered the question for their plans covering collectivebargaining employees. 

40We asked for this somewhat older information for two reasons: (1) we used 2004 Form 

5500 information to construct the survey sample, and we could use this information to 

compare the reported retiree health liabilities to the DB liabilities of the responding plan 

sponsors; and (2) changes occurred with respect to the accounting treatment of health care 

liabilities with the Medicare Prescription Drug, Improvement, and Modernization Act of 

2003 (MMA) (Pub. L. No. 108-173, 117 Stat. 2006), which could potentially make consistent 

comparisons of liabilities in later years difficult. For more information on MMA and its 

effect on accounting, see GAO, Retiree Health Benefits: Options for Employment-Based 

Prescription Drug Benefits under the Medicare Modernization Act, GAO-05-205 

(Washington, D.C.: Feb. 5, 2005). 

Page 10 GAO-09-291 Defined Benefit Pensions 
 

supported with $180 billion in assets as of 2004. We did not ask 

respondents about the assets underlying the reported $68 billion in retiree 

health liabilities. Nevertheless, these liabilities are unlikely to have much 

in the way of prefunding or supporting assets, due in large part to certain 

tax consequences.41 Although we did not ask sponsors about the relative 

sustainability of retiree health plans given the possible difference in the 

funding of these plans relative to DB plans, we did ask respondents to 

report the importance of offering a retiree health plan for purposes of firm 

recruitment and retention. Specifically, we asked about the importance of 

making a retiree health plan available relative to making a DB or DC 

pension plan available. Only a few respondents reported that offering DB 

or DC plans was less (or much less) important than offering a retiree 

health plan. 

Responding before October 2008—before the increasingly severe 

downturns in the national economy—most survey respondents reported 

they had no plan to revise benefit formulas or freeze or terminate plans, or 

had any intention to convert to hybrid plans before 2012. Survey 

respondents were asked to consider how their firms might change specific 

employee benefit actions between 2007 and 2012 for all employees. The 

specific benefit actions they were asked about were a change in the 

formula for calculating the rates of benefit accrual provided by their DB 

plan, a freeze of at least one DB plan, the conversion of traditional DB 

plans to cash balance or other hybrid designs, and the termination of at 

least one DB plan. For each possibility, between 60 percent and 80 

At the Time of the 

Survey, Large DB 

Sponsors Anticipated 

Making Few 

Additional Changes to 

DB Plans 

 

41The tax treatment of such funding is extremely unfavorable, especially when compared to 

the treatment accorded the funding of pensions. Contributions in excess of those needed 

for retiree health benefits currently payable are not deductible from a corporation’s income 

for tax purposes. Further, to the extent that excess funds are contributed, any investment 

earnings on those accumulations are considered to be income to the plan sponsor. On the 

other hand, when the health benefits are paid, they become an expense of the plan sponsor. 

This is exactly the reverse of the treatment of pensions. For pensions, the contributions to 

tax-qualified plans are, within limits, an ordinary business expense and, hence, are 

deductible from the sponsor’s income; investment earnings on the accumulations are 

deferred; and benefit payments do not reduce the sponsor’s income but are considered 

income to the recipient. 

Page 11 GAO-09-291 Defined Benefit Pensions 
 

percent42 of respondents said their firm was not planning to make the 

prospective change (see app I, slide 34). 

When asked about how much they had been or were likely to be 

influenced by recent legislation or account rule changes, such as PPA or 

the adoption of Financial Accounting Standards Board (FASB) 

requirements to fully recognize obligations for postretirement plans in 

financial statements, responding firms generally indicated these were not 

significant factors in their decisions on benefit offerings. Despite these 

legislative and regulatory changes to the pension environment, most 

survey respondents indicated that it was unlikely or very unlikely that 

their firms would use assets from DB plans to fund qualified health plans; 

increase their employer match for DC plans; terminate at least one DB 

plan; amend at least one DB plan to change (either increase or decrease) 

rates of future benefit accruals; convert a DB plan to a cash balance or 

hybrid design plan, or replace a DB plan with a 401(k)-style DC plan. 

Additionally, most respondents indicated “no role” when asked whether 

PPA, FASB, or pension law and regulation prior to PPA had been a factor 

in their decision (see app 1, slide 35). Though the majority of these 

responses indicated a trend of limited action related to PPA and FASB, it 

is interesting to note that, among the minority of firms that reported they 

were likely to freeze at least one DB plan for new participants only, most 

indicated that PPA played a role in this decision.43 Similarly, while only a 

few firms indicated that it was likely they would replace a DB plan with a 

401(k)-style DC plan, most of these firms also indicated that both PPA and 

FASB played a role in that decision.44

There were two prospective changes that a significant number of 

respondents believed would be likely or very likely implemented in the 

 

42More than 60 percent (or 27 of 42) of respondents planned no change to formula for 

calculating the rates of benefit accrual provided by DB plan; more than 60 percent (or 27 of 

42) of respondents believed their firm will probably not or definitely not freeze at least one 

DB plan; 80 percent (or 34 of 42) of respondents believed their firm will probably not or 

definitely not convert DB plans to cash balance or other hybrid plans; and 79 percent (or 33 

of 42) of respondents believed their firm will probably not or definitely not terminate DB 

plans. 

43Of the 11 firms that indicated a freeze for new participants was likely, 8 firms said that 

PPA played a role in the decision—4 of which selected “major role.” 

44Of the 5 firms that indicated replacing a DB plan with a 401(k)-style DC plan was likely, 4 

indicated that both PPA and FASB played a role—2 of which selected “major role” for each. 

Page 12 GAO-09-291 Defined Benefit Pensions 
 

future. Fifty percent45 of respondents indicated that adding or expanding 

automatic enrollment features to 401(k)-type DC plans was likely or very 

likely, and 43 percent46 indicated that PPA played a major role in this 

decision.47 This is not surprising, as PPA includes provisions aimed at 

encouraging automatic enrollment and was expected to increase the use 

of this feature. Forty-five percent48 of respondents indicated that changing 

the investment policy for at least one DB plan to increase the portion of 

the plan’s portfolio invested in fixed income assets was likely or very 

likely—with 21 percent49 indicating that PPA and 29 percent50 indicating 

that FASB played a major or moderate role in this decision51 (see app 1, 

slide 36). Our survey did not ask about the timing of this portfolio change, 

so we cannot determine the extent of any reallocation that may have 

occurred prior to the decline in the financial markets in the last quarter of 

2008. 

Finally, responding sponsors did not appear to be optimistic about the 

future of the DB system, as the majority stated there were no conditions 

under which they would consider forming a new DB plan. For the 26 

percent52 of respondents that said they would consider forming a new DB 

plan, some indicated they could be induced by such changes as a greater 

scope in accounting for DB plans on corporate balance sheets and reduced 

unpredictability or volatility of plan funding requirements (see app I, slides 

 

45Or 21 of 42 respondents that answered this question for their plans covering 

nonbargaining employees and/or their plans covering collectively bargained employees. 

46Or 18 of 42 respondents that answered this question for their plans covering 

nonbargaining employees and/or their plans covering collectively bargained employees. 

47The role of PPA is more pronounced among the 50 percent that indicated this change was 

likely; of these, 71 percent (15 out of 21) indicated that PPA played a “major role.” 

48Or 19 of 42 respondents that answered this question for their plans covering 

nonbargaining employees and/or their plans covering collectively bargained employees. 

49Or 9 of 42 respondents that answered this question for their plans covering nonbargaining 

employees and/or their plans covering collectively bargained employees. 

50Or 12 of 42 respondents that answered this question for their plans covering 

nonbargaining employees and/or their plans covering collectively bargained employees. 

51The role of PPA and FASB is more pronounced among the 45 percent of respondents that 

indicated this change was likely; of these, 47 percent (9 out of 19) indicated PPA played a 

role, and 63 percent (12 out of 19) indicated FASB played a role. 

52Or 11 of 42 respondents that answered this question for their plans covering 

nonbargaining employees and/or their plans covering collectively bargained employees. 

Page 13 GAO-09-291 Defined Benefit Pensions 
 

38). Conditions less likely to cause respondents to consider a new DB plan 

included increased regulatory requirements of DC plans and reduced 

PBGC premiums (see app I, slide 39). 

Until recently, DB pension plans administered by large sponsors appeared 

to have largely avoided the general decline evident elsewhere in the 

system since the 1980s. Their relative stability has been important, as 

these plans represent retirement income for more than three-quarters of 

all participants in single-employer plans. Today, these large plans no 

longer appear immune to the broader trends that are eroding retirement 

security. While few plans have been terminated, survey results suggest that 

modifications in benefit formulas and plan freezes are now common 

among these large sponsors. This trend is most pronounced among 

nonbargained plans but is also apparent among bargained plans. Yet, this 

survey was conducted before the current economic downturn, with its 

accompanying market turmoil. The fall in asset values and the ensuing 

challenge to fund these plans places even greater stress on them today. 

Meanwhile, the survey findings, while predating the latest economic news, 

add to the mounting evidence of increasing weaknesses throughout the 

existing private pension system that include low contribution rates for DC 

plans, high account fees that eat into returns, and market losses that 

significantly erode the account balances of those workers near retirement. 

Moreover, the entire pension system still only covers about 50 percent of 

the workforce, and coverage rates are very modest for low-wage workers. 

Given these serious weaknesses in the current tax-qualified system, it may 

be time for policymakers to consider alternative models for retirement 

security. 

We provided a draft of this report to the Department of Labor, the 

Department of the Treasury, and PBGC. The Department of the Treasury 

and PBGC provided technical comments, which we incorporated as 

appropriate. 

Conclusions 

Agency Comments 

We are sending copies of this report to the Secretary of Labor, the 

Secretary of the Treasury, and the Director of the PBGC, appropriate 

congressional committees, and other interested parties. In addition, the 

report will be available at no charge on GAO’s Web site at 

http://www.gao.gov. 

Page 14 GAO-09-291 Defined Benefit Pensions 
 

If you have or your staffs any questions about this report, please contact 

me at (202) 512-7215 or bovbjergb@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. GAO staff who made key contributions are listed in 

Barbara D. Bo

appendix III. 

vbjerg, Director 

Education, Workforce, and Income Security Issues 

Page 15 GAO-09-291 Defined Benefit Pensions 
Appendix I: Sur

Largest Private

vey Results of the Nation’s 

 DB Plan Sponsors 

Page 16 GAO-09-291 

Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 1

Defined Benefit (DB) Pensions: Survey 

Results of the Nation’s Largest Private DB 

Plan Sponsors

Preliminary Findings

February 24, 2009

 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 2

Survey Objectives

• Assess the impact of recent developments facing sponsors of 

the nation’s largest private sector DB plans:

1) What recent changes have employers made to their 

pension and benefit offerings? 

2) What changes might employers make with respect to their 

pensions in the future, and how might these changes be 

influenced by changes in pension law and other factors?

Page 17 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 3

GAO Survey of the Largest DB Sponsors: 

Overview of Survey and Topics

• The survey consisted of 105 questions and covered a broad range 

of areas including:

• the status of current DB plans

• the status of frozen plans (if any) and largest frozen plan (if applicable)

• health care information (for active employees and retirees)

• non-wage compensation targets and priorities

• pension and other benefit practices/changes over the last ten years or so and reasons for those changes

• these questions were separated into two sections: one for 

plans covering non-bargaining unit employees and one for 

plans covering bargaining units

• prospective benefit plan changes and the influence of laws and accounting rules on those prospective changes

• opinions about the possible formation of a new DB plan

Page 18 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 4

GAO Survey of the Largest DB Sponsors: 

Sampling/Summary Statistics

• Target group - A selection sample of the largest 100 private 

sector sponsors of DB plans that were also listed on the Fortune

500 or Global 500

• Of the originally targeted 100 sponsors, we were able to obtain 

contact information—typically the firm’s Director of Benefits—for 

94 sponsors

• Sponsors received a web based survey administered from 

November 2007 to October 2008; the vast majority of 

respondents completed the survey prior to July 2008

• 44 of the 94 sponsors responded

• Responding firms often had multiple plans—a median of 2 plans 

and an average of about 4 plans 

Page 19 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 5

GAO Survey of the Largest DB Sponsors: 

Significance and Interpretation

• As a selection sample of the largest plans, results are not 

generalizable to all DB plan sponsors. 

• However, the sample can serve as an important indicator of the 

health of the private DB system and the sample’s possible 

importance to the Pension Benefit Guaranty Corporation (PBGC)

• The 44 sponsoring firms that responded represent an estimated:

• 25 percent (or $370 billion) of total DB system liabilities as of 

2004

• 19 percent (or 6 million) of the system’s DB participants 

(active, separated-vested, retired as of 2004)

Page 20 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 6

GAO Survey of the Largest DB Sponsors: 

Significance and Interpretation

• Among the responding firms, the largest individual self-reported 

business line was manufacturing, with other key areas being 

finance and information. (Figure 1)

• These firms reported employing on average 75,000 employees in 

their U.S. operations in 2006.

Page 21 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 7

Figure 1: Large DB Plan Sponsors Most Common In 

Manufacturing Industries

Page 22 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 8

GAO Survey of the Largest DB Sponsors: 

Context

• The DB system has been in decline:

• Long term decline in number of private DB plans and percentage of 

system participants who are active workers

• Large net accumulated deficit ($11 billion) for Pension Benefit 

Guaranty Corporation (PBGC) which insures private DB plans

• Developments affecting DB plans and sponsors:

• Pension Protection Act of 2006 and related legislation, which 

tightened funding rules and raised PBGC premiums 

• New accounting rules, such as FAS 158, which highlighted 

importance of plan underfunding on corporate balance sheets

• Rising cost pressures from health insurance for active workers and 

retirees

Page 23 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 9

GAO Survey of the Largest DB Sponsors: 

Context

• Survey conducted prior to:

• Financial market turmoil of 2008

• Detroit automakers, who have DB plans, seeking federal 

assistance

• Rising unemployment

• Recently legislated pension funding relief, the Worker, 

Retiree, and Employer Recovery Act of 2008 

Page 24 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 10

Overview: Survey Findings

• Between 1997 and October 2008:

• Revisions to DB plan features (e.g. benefit formulas, plan freezes, 

hybrid plan conversions) were common, especially among sponsors’

non-bargained (NB) plans

• Revisions to defined contribution (DC) plan features were most 

common among sponsors’ NB plans

• Many respondents reported having already implemented or 

planning to implement auto-enrollment 

• Health insurance benefits to current retirees were still common, but 

20 percent placed full costs on retirees; over 46 percent did not offer 

benefit to some future retirees, or employees hired after a certain 

date

• Most DB plan sponsors planned few changes before 2012 

Page 25 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 11

Large DB Plan Sponsor Survey: Trends in DB Plan 

Sponsorship and Design

Between 1997 and October 2008:

• Collectively bargained (CB) plans were more likely to report a benefit 

formula improvement in generosity while NB plans were more likely to 

report a decline in benefit formula generosity (Figure 2)

• For CB plans key reasons cited for changes were competitive economic pressures and employee demographics (Figure 3)

• For NB plans key reasons cited for changes were funding unpredictability, competitive economic pressures and employee 

demographics (Figure 4)

• Respondents reported more conversions to hybrid designs among NB

plans (Figure 5)

• Top reasons for non-bargaining unit conversions: employee demographics and unpredictable funding requirements (Figure 6)

Page 26 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 12

Figure 2: Sponsors Reported DB Formula Changes as 

Generally More Generous for Plans that are CB

Note: Nearly 40 percent of respondents did not respond to questions regarding collectively bargained plans.

Page 27 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 13

Figure 3: Reasons for Formula Changes Varied by 

Bargaining Status of the Plan: Plans Covering CB 

Employees

Note: The top three key reasons are ranked in declining order of the percentage of firms listing a ‘major reason,’ while the bottom three reasons are 

listed in declining order of firms listing ‘not a reason.’ 33 percent of respondents selected Other as a Major Reason; 3 out of 6 respondents mention 

inflation or increased cost of living as the other reason. 

Page 28 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 14

Figure 4: Reasons for Formula Changes Vary by 

Bargaining Status of the Plan: Plans Covering NB 

Employees

Note: The top three key reasons are ranked in declining order of the percentage of firms listing a ‘major reason,’ while the bottom three reasons are 

listed in declining order of firms listing ‘not a reason.’ 17 percent of respondents selected Other as a ‘major reason;’ 3 out of 5 respondents mention 

mergers or acquisitions as the other reason .

Page 29 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 15

Figure 5: Conversion to Hybrid/Cash Balance Plans

Page 30 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 16

Figure 6: Reasons for Non-Bargaining Unit 

Conversions to Hybrid/Cash Balance plans

Note: The top three key reasons are ranked in declining order of the percentage of firms listing a ‘major reason,’ while the bottom three reasons 

are listed in declining order of firms listing ‘not a reason.’ 33 percent of respondents selected ‘other’ as a ‘major reason.’ In ‘other’ reasons listed 

by those respondents, 4 out of 9 listed merger or acquisition as the major reason for conversion. 

Page 31 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 17

Large DB Plan Sponsor Survey: Trends in DB Plan 

Sponsorship and Design—Freezes and Termination

• 62 percent (26 of 42) of respondents in the survey froze at least one plan; 

however, these larger sponsors were likely to report multiple plans 

• 28 percent of respondents plans were frozen (47 of a total of 169 plans); only 8 

percent were under a hard freeze, or a type of plan freeze in which all future 

benefit accruals cease. (Figure 7)

• the rate of plan freezes is generally consistent with rate found for a 

subset of larger sponsors using a statistically representative sample in 

previous report analyzing freeze data*

• prior report found larger sponsors were significantly less likely than 

smaller sponsors to have implemented a hard freeze

• Plan terminations were extremely rare among large plans, with only a few 

occurring during the time the sample was selected and administered

*See GAO, Defined Benefit Pensions: Plan Freezes Affect Millions of Participants and May Pose Retirement Income Challenges, GAO-08-817 

(Washington, D.C.: July 21, 2008)

Page 32 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 18

Figure 7: Freeze Patterns among Respondents and their 

Plans

Page 33 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 19

Trends in 401(k) Contributions among Large DB Plan 

Sponsors

• Most DB plan sponsors also offered a DC plan, typically a 401(k) plan

• From 1997 to the time of survey response, most DB sponsors either 

increased or did not change employer contributions to 401(k) plans for 

their NB employees. (Figure 8)

• Main reasons for change included redesigned matching formula as well as compensation adjustments to attract top employees. 

• The vast majority of respondents reported that plans covering NB

employees either increased or did not change employee contributions. 

• Main reasons among respondents reporting increased contributions included addition of automatic enrollment feature to one or more

plans.

• 72 percent of large sponsors reported either using or planning to use 

auto enrollment for plans covering NB employees (Figure 9).

Page 34 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 20

Trends in 401(k) Contributions among Large DB Plan 

Sponsors: Bargaining Unit Employees

• From 1997 to the time of survey response, most DB sponsors 

either increased or did not change employer contributions to 

401(k) plans for their bargaining unit employees. (Figure 8)

• No single reason stood out for this result.

• Bargaining unit employees of most sponsors did not change 

employee contributions. (Figure 8) 

• 50 percent of large sponsors with plans covering CB employees 

reported either not using or not planning to use auto enrollment 

(Figure 9).

Page 35 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 21

Figure 8: Employer and Employee 401(k) 

Contributions for Non Bargaining and Bargaining Unit 

Employees

Page 36 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 22

Figure 9: Prevalence of 401(k) Auto-Enrollment 

Feature for Non Bargaining and Bargaining Unit 

Employees

Page 37 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 23

Large DB Plan Sponsor Survey: Health Benefits for 

Active Employees and Retirees

• Health care was the single largest benefit as a percentage of base pay 

(Figure 10)

• All responding DB plan sponsors offered health insurance to active 

employees and contributed to the cost

• All responding DB plan sponsors offered health insurance to at least 

some current retirees—nearly all to both pre-age 65 and age 65-plus 

employees 

• 80 percent provided health insurance to at least some active 

employees who become eligible for the benefit upon retirement

• 20 percent provided health insurance that was fully paid by the 

retired employee (Figure 11)

Page 38 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 24

Figure 10: For Large DB Sponsors, Health 

Insurance for Active Employees Was the Largest 

Component of Non-wage Compensation 

Note: Chart categories not mutually exclusive; N varies from 15-25 as respondents were not required to select a response to each category.

Page 39 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 25

Figure 11: Provision of Health Benefits to Active 

Employees, Current or Future Retirees

Note: Chart categories not mutually exclusive.

*Responses in Other generally indicate varying benefits offered to different segments of the employee population 

Page 40 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 26

Large DB Plan Sponsor Survey: Health Benefits for 

Current Retirees

• Compared to respondents reporting on their benefits 

covering CB employees, respondents with NB employees 

reported decrease in the employer’s share of the cost of 

providing health benefits to current retirees (Figure 12)

• Main reasons were increases in cost of health insurance 

for retirees and for active employees (Figure 13)

• A plurality of respondents with CB employees reported no 

change in firm’s share of the cost of providing health benefits 

to current retirees

Page 41 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 27

Figure 12: Changes in Share of Health Benefit Costs 

for Current Retirees by Non-bargaining Unit and 

Bargaining Unit Firms

Page 42 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 28

Figure 13: Reasons for Changes in Non-Bargaining 

Unit Firms' Share of Health Benefit Costs for Current

Retirees

Note: The top three key reasons are ranked in declining order of the percentage of firms listing a ‘major reason,’ while the bottom three reasons are 

listed in declining order of firms listing ‘not a reason.’ 24 percent of respondents selected Other as a Major Reason; 5 out of 8 respondents mentioned 

caps reached or FAS 106 caps reached as part of the reason

Page 43 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 29

Large DB Plan Sponsor Survey: Health Benefits for 

Future Retirees

• 46 percent of plan sponsors no longer offered retiree health benefits to 

active employees hired after a certain date.

• 54 percent decreased or eliminated the firm's share cost of providing 

health benefits for future retirees who were non-bargaining employees; 

(Figure 14)

• Primary reasons cited were large cost increases in health insurance 

for both retirees and active employees (Figure 15)

• 41 percent of sponsors with bargaining unit employees reported decrease 

in or elimination of firm's share of health care costs for future retirees 

(Figure 14)

• 26 percent reported no change

• Primary reason cited was match/maintain parity with competitor’s

benefits package (Figure 16)

Page 44 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 30

Figure 14: Changes in Share of Health Benefit Costs 

for Future Retirees by Non-bargaining Unit and 

Bargaining Unit Firms

Page 45 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 31

Figure 15: Reasons for Changes in Non-Bargaining Unit 

Firms' Share of Health Benefit Costs for Future Retirees

Note: The top three key reasons are ranked in declining order of the percentage of firms listing a ‘major reason,’ while the bottom three reasons are 

listed in declining order of firms listing ‘not a reason.’

Page 46 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 32

Figure 16: Reasons for Changes in Collective 

Bargaining Unit Firms' Share of Health Benefit Costs 

for Future Retirees

Note: The top three key reasons are ranked in declining order of the percentage of firms listing a ‘major reason,’ while the bottom three reasons are 

listed in declining order of firms listing ‘not a reason.’ 40 percent of respondents selected Other as a Major Reason; within the Other reasons listed by 

these respondents, there were no consistent responses. 

Page 47 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 33

Retiree Health Care Represents a Significant 

Liability for DB Plan Sponsors

• As of the end of 2004, 29 DB plan sponsors reported a total liability for retiree 

health plan year was $68 billion.

• This was about 18 percent of the $370 billion of total DB liabilities that we 

estimated for all respondents from the 2004 Form 5500. 

• If we include the liabilities of only those that reported a retiree health 

liability, then the retiree health represented 40 percent of their estimated DB 

liabilities ($174 billion; covered by $180 billion in assets).

• We chose 2004 because:

• We used 2004 Form 5500 data to select the respondents; and

• Changes occurred with respect to the accounting treatment of health care 

liabilities that made it difficult to ascertain those liabilities in later years.

Page 48 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 34

Large DB Plan Sponsor Survey: Most Sponsors 

Reported Few Planned Changes Before 2012

• When sponsors were asked about prospective changes to benefit 

offerings, most plan sponsors reported no firm plans to revise 

benefit formulas, freeze or terminate plans, or convert hybrid plans 

before 2012: 

• More than 60 percent of respondents planned no change to formula for calculating the rates of benefit accrual provided by

DB plan 

• More than 60 percent of respondents believed their firm will probably not or definitely not freeze at least one DB plan

• 80 percent of respondents believed their firm will probably not or definitely not convert DB plans to cash balance or other hybrid 

plans

• 79 percent of respondents believed their firm will probably not or definitely not terminate DB plans 

Page 49 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 35

Large DB Plan Sponsor Survey: Sponsors Expect 

Few Changes to Their Pension Plans

• When sponsors were asked about how the pension 

environment (i.e. laws, accounting rules, etc.) might 

influence future benefit offerings, a majority respondents 

believed it unlikely or very unlikely that firm would:

• use assets from DB to fund qualified health plans

• increase employer match for DC plans

• terminate at least one DB plan 

• amend at least one DB plan to change (either increase or decrease) rates of future benefit accruals

• convert DB plan to cash balance or hybrid plan

• replace DB plan with 401(k)-style DC plan

• PPA, FASB played virtually no role in changes to retirement 

plans

Page 50 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 36

Large DB Plan Sponsor Survey: Limited Changes to 

DB and DC plans in response to PPA, FASB, or other 

changes prior to passage of PPA

• 50 percent of sponsors believed adding or expanding 

automatic enrollment features to 401(k)-type DC plans was 

very likely or likely in the future

• 43 percent of these said PPA played major role in this 

expansion

• 45 percent of respondents believed changing the 

investment policy for at least one DB plan to increase the 

portion of the plans’ portfolio invested in fixed income assets 

was very likely or likely

• 21 percent said PPA played major/moderate role; 29 

percent said FASB played major/moderate role

Page 51 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 37

Large DB Plan Sponsor Survey: Conditions to 

Consider Forming New DB Plans

• Most sponsors reported no possible conditions that could make 

them definitely consider forming a new DB plan

• 26 percent of sponsors reported that there were conditions under

which they would have considered offering a new DB plan; the 

most common conditions selected were:

• Provide sponsors with greater scope in accounting for DB 

plans on corporate balance sheets

• DB plans became more effective as an employee retention 

tool 

• Reduced unpredictability or volatility in DB plan funding 

requirements (Figure 17)

Page 52 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 38

Figure 17: Among the 26 Percent of Respondents that 

Would Consider a New DB Plan, Conditions Under 

Which They Would Consider Doing So

Note: The top three key reasons are ranked in declining order of the percentage of firms listing a ‘major reason,’ while the bottom three reasons are 

listed in declining order of firms listing ‘not a reason.’

Page 53 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 39

Figure 18: Conditions Under Which Firms Would 

Have Considered Offering Employees a New DB Plan 

(continued)

Note: The top three key reasons are ranked in declining order of the percentage of firms listing a ‘major reason,’ while the bottom three reasons are 

listed in declining order of firms listing ‘not a reason.’

Page 54 GAO-09-291 Defined Benefit Pensions 
Appendix I: Survey Results of the Nation’s 

Largest Private DB Plan Sponsors 

Page 40

Implications/Concluding Observations

• Stability of large sponsor plans now increasingly vulnerable to 

the broader decline of the DB system

• Benefit formula revisions and plan freezes common among survey respondents, especially among NB plans, but among 

CB plans as well

• Findings consistent with mounting evidence of challenges facing 

private sector retirement system

• DC plans losses from current markets, low coverage participation rates high fees

• Current market turmoil exacerbates these challenges

• Findings highlight need for examination of current system’s 

problems and the need to consider alternative models

Page 55 GAO-09-291 Defined Benefit Pensions 
Appendix II: Scope and Methodology 

Page 56 GAO-09-291 

Appendix II: Scope and Methodology 

To achieve our objectives, we conducted a survey of sponsors of large 

defined-benefit (DB) pension plans. For the purposes of our study, we 

defined “sponsors” as the listed sponsor on the 2004 Form 5500 for the 

largest sponsored plan (by total participants).1

 To identify all plans for a 

given sponsor, we matched plans through unique sponsor identifiers.2

We constructed our population of DB plan sponsors from the 2004 Pension 

Benefit Guaranty Corporation’s (PBGC) Form 5500 Research Database by 

identifying unique sponsors listed in this database and aggregating planlevel data (for example, plan participants) for any plans associated with 

this sponsor. As a result of this process, we identified approximately 

23,500 plan sponsors. We further limited these sponsors to the largest 

sponsors (by total participants in all sponsored plans) that also appeared 

on the Fortune 500 or Fortune Global 500 lists. We initially attempted to 

administer the survey to the first 100 plans that met these criteria, but 

ultimately, we were only able administer the survey to the 94 sponsoring 

firms for which we were able to obtain sufficient information for the firm’s 

benefits representative. While the 94 firms we identified for the survey are 

an extremely small subset of the approximately 23,500 total DB plan 

sponsors in the research database, we estimate that these 94 sponsors 

represented 50 percent of the total single-employer liabilities insured by 

PBGC and 39 percent of the total participants (active, retired, and 

separated-vested) in the single-employer DB system as of 2004. 

The Web-based questionnaire was sent in December 2007, via e-mail, to 

the 94 sponsors of the largest DB pension plans (by total plan participants 

as of 2004) who were also part of the Fortune 500 or Global Fortune 500. 

This was preceded by an e-mail to notify respondents of the survey and to 

Population and 

Sample Design 

Administration of 

Survey 

 

1

At the time of sample selection we removed plans that terminated after 2004, which may 

have also included plans that reported a final filing or had merged into another plan. 

2

These include the nine-digit employee identification number (EIN) found in the Form 

5500, as well as the Committee on Uniform Securities Identification Procedures (CUSIP) 

number, which is contained in the PBGC Research Database. A CUSIP number identifies 

most North American securities, including stocks of all registered U.S. and Canadian 

companies and U.S. government and municipal bonds. The number consists of nine 

characters (including letters and numbers) that uniquely identify a company or issuer and 

the type of security. In addition to these two methods, we identified sponsors by visually 

inspecting plan names and sponsor names from the database to find common sponsors that 

were not identified by EINs or CUSIPs. 

 Defined Benefit Pensions 
Appendix II: Scope and Methodology 

test our e-mail addresses for these respondents. This Web questionnaire 

consisted of 105 questions and covered a broad range of areas, including 

• the status of current DB plans; 

• the status of frozen plans (if any) and the status of the largest frozen plan 

(if applicable); 

• health care for active employees and retirees; 

• nonwage compensation priorities; 

• pension and other benefit practices or changes over approximately the last 

10 years3

 and the reasons for those changes4 (parallel questions asked for 

plans covering collectively bargained employees and those covering 

nonbargaining employees);5

• prospective benefit plan changes; 

 

3

The GAO Survey of Large Defined Benefit Plan Sponsors asked firms about changes made 

to benefit offerings between 1997 and the time of survey response, which for nearly all 

responding sponsors, was prior to July 2008. 

4

The reasons varied by the individual question. We developed an initial set of reasons that 

we pretested with sponsors, and we revised our list of reasons, given respondent reactions 

and input during those pretests. An open-ended “other” reason was also offered to 

respondents if the sponsor felt other reasons were needed to clarify an answer. 

5

The parallel questions in the survey asked the respondents to report for “plans covering 

nonbargaining unit employees only” and “plans covering collective-bargaining unit 

employees.” Generally speaking, 40 respondents reported on the questions referring to 

plans covering nonbargaining unit employees, and 24 respondents reported on the 

questions referring to plans covering collective-bargaining unit employees. The 24 

respondents that answered questions related to plans covering collective-bargaining unit 

employees generally also answered questions relating to plans covering nonbargaining unit 

employees. The number of respondents for a given survey question are enumerated in the 

briefing as “Ns” in appendix II. While we attempted to use consistent terminology for 

bargaining status throughout the survey, plans covering collectively bargained employees 

are not necessarily the same as collectively bargained plans. Some collectively bargained 

plans may cover nonbargaining unit employees—possibly under a separate nonnegotiated 

benefit structure. Further, a plan covering members of a bargaining unit is sometimes not 

collectively bargained, although collectively bargained pension plans are common among 

large plan sponsors that have employees covered by collective-bargaining agreements. Our 

survey only asked about plans covering collectively bargained employees, and we cannot 

determine if these plans also include nonbargained employees or if the plan itself is 

actively bargained. 

Page 57 GAO-09-291 Defined Benefit Pensions 
Appendix II: Scope and Methodology 

• the influence of laws and accounting practices on possible prospective 

benefit changes; and 

• opinions about the possible formation of a new DB plan. 

The first 17 questions and last question of the GAO Survey of Sponsors of 

Large Defined Benefit Pension Plans questionnaire mirrored the questions 

asked in a shorter mail questionnaire (Survey of DB Pension Plan 

Sponsors Regarding Frozen Plans) about benefit freezes that was sent to a 

stratified random sample of pension plan sponsors that had 100 or more 

participants as of 2004. Sponsors in the larger survey were, like the shorter 

survey, asked to report only on their single-employer DB plans. 

To help increase our response rate, we sent four follow-up e-mails from 

January through November 2008. We ultimately received responses from 

44 plan sponsors, representing an overall response rate of 44 percent. 

To pretest the questionnaires, we conducted cognitive interviews and held 

debriefing sessions with 11 pension plan sponsors. Three pretests were 

conducted in-person and focused on the Web survey, and eight were 

conducted by telephone and focused on the mail survey. We selected 

respondents to represent a variety of sponsor sizes and industry types, 

including a law firm, an electronics company, a defense contractor, a 

bank, and a university medical center, among others. We conducted these 

pretests to determine if the questions were burdensome, understandable, 

and measured what we intended. On the basis of the feedback from the 

pretests, we modified the questions as appropriate. 

The practical difficulties of conducting any survey may introduce other 

types of errors, commonly referred to as nonsampling errors. For example, 

differences in how a particular question is interpreted, the sources of 

information available to respondents, or the types of people who do not 

respond can introduce unwanted variability into the survey results. We 

included steps in both the data collection and data analysis stages for the 

purpose of minimizing such nonsampling errors. 

We took the following steps to increase the response rate: developing the 

questionnaire, pretesting the questionnaires with pension plan sponsors, 

and conducting multiple follow-ups to encourage responses to the survey. 

Nonsampling Error 

Page 58 GAO-09-291 Defined Benefit Pensions 
Appendix II: Scope and Methodology 

We performed computer analyses of the sample data to identify 

inconsistencies and other indications of error and took steps to correct 

inconsistencies or errors. A second, independent analyst checked all 

computer analyses. 

We initiated our audit work in April 2006. We issued results from our 

survey regarding frozen plans in July 2008.6

 We completed our audit work 

for this report in March 2009 in accordance with all sections of GAO’s 

Quality Assurance Framework that are relevant to our objectives. The 

framework requires that we plan and perform the engagement to obtain 

sufficient and appropriate evidence to meet our stated objectives and to 

discuss any limitations in our work. We believe that the information and 

data obtained, and the analysis conducted, provide a reasonable basis for 

any findings and conclusions. 

 

6

We previously used a portion of this survey to analyze frozen plan tendencies, which used 

a stratified random probability sample of 471 DB pension sponsors from PBGC’s 2004 Form 

5500 Research Database. See GAO, Defined Benefit Pensions: Plan Freezes Affect Millions 

of Participants and May Pose Retirement Income Challenges, GAO-08-817 (Washington, 

D.C.: July 21, 2008). 

Page 59 GAO-09-291 Defined Benefit Pensions 
Appendix III: GAO

A

 Contact and Staff 

cknowledgments 

Page 60 GAO-09-291 

Appendix III: GAO Contact and Staff 

Acknowledgments 

Barbara D. Bovbjerg, (202) 512-7215 or bovbjergb@gao.gov. 

In addition to the contact above, Joe Applebaum, Sue Bernstein, Beth 

Bowditch, Charles Ford, Brian Friedman, Charles Jeszeck, Isabella 

Johnson, Gene Kuehneman, Marietta Mayfield, Luann Moy, Mark Ramage, 

Ken Stockbridge, Melissa Swearingen, Walter Vance, and Craig Winslow 

made important contributions to this report. 

Contact 

Staff 

Acknowledgments 

(130889) Defined Benefit Pensions 
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