Large Corporate Employers Continue Support for Retirement Plans

Traditional Pension Plans Remain a Key Component of Retirement Security

December 18, 2006 - Bethesda, MD - Despite significant uncertainties about future changes in laws and regulations, large corporate retirement plan sponsors provided significant support to both their defined benefit (DB) and defined contribution (DC) plans in 2005. According to a survey conducted by the Committee on Investment of Employee Benefit Assets (CIEBA), an affiliate of the Association for Financial Professionals, CIEBA members contributed $23 billion to their defined benefit plans in 2005, more than $5,500 per active participant. At the same time, employer contributions to defined contribution plans equaled almost $2,300 per active employee.

CIEBA represents many of the nation's largest private sector retirement funds and its members manage almost $1.4 trillion. The survey covered 112 corporate plan sponsors responsible for the management of $852 billion in pension assets and $511 billion in defined contribution plan assets. Plans in the survey cover 10.6 million DB plan participants and 5.5 million DC plan participants.

While the vast majority of CIEBA members sponsor both defined benefit and defined contribution plans, defined benefit plans continue to be central to the provision of retirement income for plan participants. DB plans had 67 percent more assets and paid out 38 percent more in benefits compared to DC plans.

Assets in both DB and DC plans increased from beginning year levels by five percent and two percent respectively. DB plan increases were due largely to investment returns while contributions represented the largest source of DC plan asset growth. The average investment returns for DB plans was 9.3 percent (net of all expenses) compared to an average of 4.7 percent (net of fees) for DC plan accounts.

In the defined contribution arena, employer and employee contributions per active employee continued to increase. The combined total per employee was $8,027 in 2005 compared to $7,875 in 2004.

"This CIEBA survey demonstrates the commitment of CIEBA members to providing retirement income to their employees," said William F. Quinn, chairman of CIEBA. "However, we are concerned that recent changes in the accounting and funding rules for traditional pension plans may jeopardize the retirement security of millions of working Americans."

Additional survey findings include:

• Benefit payments totaled $97 billion in 2005, of which $56 billion was paid to DB participants and $41 billion to DC participants.

• DB plan assets were invested as follows: 38 percent to U.S. equity, 21 percent to international equity, 28 percent to fixed income/cash, and 13 percent to other investments.

• DC plan assets were invested as follows: 36 percent to diversified equity portfolios, 25 percent to employer stock, 27 percent to fixed income, 8 percent to balanced funds, and 4 percent to other options and loans. Company stock allocations have steadily declined since 2001 when 36 percent of DC assets were in company stock.

• Most DB assets (84%) were actively managed compared to approximately half (52%) of DC assets.

• A significant percentage of CIEBA members now offer some form of advice to DC plan participants. Individual financial planning assistance and interactive advisory programs were offered by 28 percent and 39 percent of DC plan sponsors, respectively. Ten percent (10%) offered professionally managed participant accounts.

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The Committee on Investment of Employee Benefit Assets (CIEBA) is a nationally recognized forum for corporate pension plan sponsors on fiduciary and investment matters. CIEBA is the voice of the Association for Financial Professionals (AFP) on employee benefit plan asset management and investment issues.

The Association for Financial Professionals, headquartered in Bethesda, Maryland, supports more than 15,000 individual members from a wide range of industries throughout all stages of their careers in various aspects of treasury and financial management. AFP is the daily resource for financial professionals for continuing education, career development, certifications, research, representation to legislators and regulators, and the development of industry standards. Sponsored by the Association for Financial Professionals, the CTP designation is the globally recognized industry standard for treasury and a requirement for a changing profession. More than 16,000 professionals have earned AFP's certification since 1986. For more information about AFP, visit http://www.AFPonline.org