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Impact of Pension Freezes

An analysis by the Employee Benefit Research Institute notes that the impact of pension freezes varies widely based on individual plan designs, workers' ages and job tenures, among other factors.

Tuesday, May 2, 2006
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A new analysis by the Employee Benefit Research Institute in Washington quantifies how workers are likely to be affected by pension freezes, and how much they would have to save in a 401(k) to offset the losses of accrued benefits from the pension freeze.

The analysis, written by EBRI research Jack VanDerhei, research director of the EBRI fellows program, notes the impact on an individual worker varies widely, based on the unique nature and terms of each pension plan that is frozen; the variation in workers? age, job tenure and future investment results.

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The findings conclude, among other things, that workers in career-average pension plans would need to save a median amount of about 7 percent of their annual salaries to replace the lost accrual benefits of a pension freeze, while workers in final-average pension plans would need to save a median amount of about 8 percent of their annual salaries.

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