The Pension Benefit Guaranty Corporation has found that 9.4 percent of pension plans had halted participants' benefit accruals as of 2003, the most recent year for which complete data are available.

To date, the principal source of data on frozen defined benefit pension plans has come from client surveys conducted by benefits consulting firms. The PBGC says its study is the first to examine the "Form 5500" annual reports that administrators of qualified pension plans must file with the federal government.

The 2003 data indicated that while 9.4 percent of all plans were frozen, only 2.5 percent of participants were affected because most frozen plans were small.

"While anecdotal evidence suggests that the number of frozen pension plans has increased since 2003, reports of a mass exodus from the defined benefit pension system appear to be overstated," says PBGC Executive Director Bradley Belt. "As long as employees place a high value on defined benefit plans, companies will continue to view them as a valuable recruitment and retention tool."

Breaking out the survey data by plan size, the PBGC found that 10.1 percent of small plans (those with fewer than 100 participants) were frozen, affecting 12.5 percent of the participants in these plans. At the other end of the spectrum, 2.2 percent of large plans (with more than 5,000 participants) were frozen, affecting only 1 percent of their participants.

The Form 5500 data for 2003 also showed that, on average, frozen plans are not as well funded as non-frozen plans. Half of frozen plans were less than 80 percent funded on a current liability basis, versus one-third of non-frozen plans. Industries more likely to have frozen plans included fabricated metals, apparel and textiles, rubber and plastics, primary metals, and retail trade. Plan freezes were less likely in the public utility, motor vehicle, and the finance, insurance and real estate industries. 

The impact of plan freezes on the PBGC's financial condition is likely to be mixed, according to the study. On the one hand, to the extent that frozen plans are more likely to be terminated by employers, the number of participants in the system would decline and the PBGC's flat-rate premium would be reduced. On the other, to the extent that frozen plans become better funded as a result of the cap on new benefit accruals, claims against the pension insurance program are likely to be smaller.

The PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974. It currently guarantees payment of basic pension benefits earned by 44 million American workers and retirees participating in over 31,000 private-sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and by investment returns.