Employee Benefit News

April 13, 2006

Milliman maintains enthusiasm for DB plans

The freezing of pension plans has not reached a tipping point and
may not do so, according to officials from the Seattle-based
consultancy Milliman, which released new research on defined
benefit plans Wednesday.

Although there were many negative bullet points among the findings,
the firm expressed optimism about the future of DB plans because
they have proven so effective over time. The tipping point would be
reached if freezing trends make inroads in the financial services
industry, because DB plans are so deeply ingrained in their
corporate culture and tradition, according to John Ehrhardt, principal
and consulting actuary.

Milliman's survey of 100 companies finds that the aggregate DB
deficit has been reduced by $67.6 billion over three years, leaving a
$96 billion deficit. Last year alone, companies cut their deficits by a
total of $14.8 billion. Strong results from Wall Street also boosted the
investment return average by 11.3% in 2005, soaring above the
expected average return of 8.5%. But only eight companies posted
income from their pensions last year, down from 15 in 2004 and 60
in 2001.

DB plan costs reached $23.7 billion for the 100 firms last year,
compared to $18.6 billion in 2004 and $14.2 billion in 2003.