Although funding for company pension plans is improving, they will soon be hit by higher fees and bigger obligations to retirees.
Employers face a 52 percent increase in the regulatory cost of administering pension plans by 2016 as well as a whopping $150 billion increase in liabilities to retirees with longer life spans, reports The Wall Street Journal.
In December, Congress raised the fees companies have to pay the Pension Benefit Guaranty Corp. Fees for each employee covered will rise from $42 last year to $64 by 2016.
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At the same time, the Society of Actuaries expects the average man who turns 65 this year to live to 86.6., up from 82.6 in 2000. The average woman is expected to live to 88.8, up from 85.2 in 2000.
"It's a big deal, Caitlin Long, head of the corporate strategies group at Morgan Stanley, told the newspaper. "It's definitely causing companies to rethink the benefits of holding a pension."
Long estimated that the higher fees could mean an additional $20 billion in costs to companies' $2 trillion in liabilities over the life of the plans.
Many companies are now looking for ways to cut pension expenses, moving away from defined-benefit plans, which guarantee a certain payment for life, to defined-contribution plans, which assure only employees' contributions.
More than 60 million American workers and retirees are covered by defined-benefit plans.
In addition, some companies are closing their pension plans to new employees, offering lump-sum payments to retirees and outsourcing pension-fund management to trim costs, according to the Journal.
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