We confined our research to the 35 publicly traded companies on the Fortune 500 list in Houston and Dallas. Some of the notables include ConocoPhillips, Texas Instruments, Southwest Airlines, Continental Airlines and CenterPoint Energy. Out of those 35 companies, 28 still have traditional defined-benefit plans for their employees in one way or another as stated in their most recent 10-K filings. In effect, 80 percent of Fortune 500 companies located in Texas' two biggest cities retain defined-benefit-style plans.
It’s an interesting finding and worthy of note because all too many people think defined benefit plans don’t exist in the private sector. Not true. They do exist, but their administrative and fiduciary costs are prohibitive for most companies to implement for all their employees. A Deloitte study of corporate employers confirms as much, and we’ll be talking more about that in future blogs.
After reviewing the data, our non-confirmed hunch is that defined benefit plans in the private sector exist mostly for upper echelon employees, not the rank and file. Again, we have no evidence of this – it’s just a hunch. But because administrative costs are so high, it makes sense for corporations to limit the expense to key employees and officers who are part of an increasingly exclusive club, no doubt. We will continue our research and learn more about these plans in the private sector. – Max Patterson