IWS Documented News INTERNATIONAL

IWS Documented News Service
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Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
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Watson wyatt

INSIDER

Defined Benefit vs. 401(k) Investment Returns: The 2006-2008 Update [December 2009]
http://www.watsonwyatt.com/us/pubs/insider/showarticle.asp?ArticleID=22909

Watson Wyatt has been comparing investment rates of return in defined benefit (DB) and defined contribution (DC) plans for more than 10 years,1 and DB plans have been the long-term victor. This analysis updates our prior studies with investment returns for 20062 and 2007 for a large set of plans, as well as a snapshot of year-end returns for 2008 based on a small set of plan sponsors.

In our last analysis, we found that between 1995 and 2006, DB plans outperformed DC plans by an average of 1 percentage point per year. Earlier studies also found that, over time, DB plans attained higher returns than 401(k) plans. In this year’s analysis, the results remain in line with past analyses; DB plans outperform DC plans by roughly an average of 1 percentage point a year.

Our current analysis of year-end 2008 also shows — albeit drawn from a reduced sample — that despite generally poor returns for both plan types during the financial crisis, median returns for DB plans remained around 1 percentage point higher than those for DC plans — and some DB plans even reported positive returns.

Like our earlier studies, this analysis is based on Form 5500 financial and pension disclosure data through 2007 released by the Department of Labor (DOL). Results for 2008 are based on a Watson Wyatt survey of plan sponsors about their Form 5500 information. We also use the same formula as earlier studies to calculate the average rate of return:

AND MUCH MORE...including TABLES...

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This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.

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Stuart Basefsky                   
Director, IWS News Bureau                
Institute for Workplace Studies 
Cornell/ILR School                        
16 E. 34th Street, 4th Floor             
New York, NY 10016                        
                                   
Telephone: (607) 255-2703                
Fax: (607) 255-9641                       
E-mail: smb6@cornell.edu                  
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