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Employers Are Still Satisfied With Defined-Benefit Plans.

Assets of defined-contribution plans--most commonly 401(k)s--grew 19% in 1998, according to a survey of 130 companies that are members of the Committee on the Investment of Employee Benefit Assets. But assets in traditional defined-benefit plans continued to be the bedrock of employer-sponsored pensions.

Defined-benefits plans last year had about 55% more in assets, covered almost 90% more people and paid out about 30% more in benefits than their defined-contribution counterparts, according to the survey by the Washington-based organization.

Formed in 1985, the committee is composed of more than 150 of the largest corporate pension funds in the United States with more than $1 trillion in assets under management on behalf of more than 15 million plan participants and beneficiaries.

"There is a general assumption that many companies have abandoned traditional defined-benefit plans, but the survey shows that the largest companies clearly haven't," said Allen Reed, committee chairman and president of General Motors Investment Management Corp., GM's pension management subsidiary.

Among other findings:

* Of the companies surveyed, 99% sponsored both types of plans, while only 16% sponsor cash-balance or hybrid defined-benefit plans.

* Defined-benefit plan assets were allocated 62% to equity, 28% to fixed income and 10% to other investments.

* Defined-contribution plan assets were allocated 31% to diversified equity portfolios, 38% to employer stock, 22% to fixed income, 7% to balanced funds and 2% to other options and loans.

The percentage of companies offering defined-contribution plan investment options in international equity, global equity and balanced funds rose substantially since 1992 to 69%, 22% and 81%, respectively.

Eighty-three percent of the companies provided investment education to their defined-contribution plan participants.

Total defined-contribution plan contributions per employee rose to more than $5,500 in 1998, with 29% of the total contributed by employers. Some 80% of all eligible workers participated in defined-contribution plans.
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Comment:Employers Are Still Satisfied With Defined-Benefit Plans.
Publication:Best's Review
Article Type:Brief Article
Geographic Code:1USA
Date:Jan 1, 2000
Words:301
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