How much do defined benefit pension plans costemployers?

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That depends on several factors, according to new analysis bythe Bureau of Labor Statistics.

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The data provider-arm of the Department of Labor set out toestimate the cost of pensions per employee for private-sectorsponsors.

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In 2015, the average pension costs was $4.48 per hour of laborworked for goods-producing industries (construction andmanufacturing), a number that accounts for only those workers withaccess to a defined benefit plan.

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Average costs drop precipitously when estimated for all workers,regardless of access to a pension, are factored.

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Pension costs for goods-producing industries have beenincreasing over the past decade. In 2008, the average was $2.73 perhour of labor. By 2012 it was $3.04, and in 2014 it was $4.00.

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In service-producing industries, which include trade,transportation, health care and education, the average cost ofproviding a pension was $3.00 per hour of labor worked.

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Costs were highest for what the Bureau calls the “information”sector of the economy, which includes the publishing and softwareindustries. In those areas of the economy, sponsors are paying$8.00 per hour of labor worked toward retirement obligations.

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Sponsors’ overall cost comes from three expenses: premiums toPension Benefit Guaranty Corp., fees on the administration ofplans, and the expense of employer contributions.

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The lowest cost of offering a pension was experienced thefinancial activities sector, where sponsors paid and average of$1.19 per hour worked, less than the $1.31 the sector paid in 2008.It is the only sector of the economy to be paying less now than itdid in 2008.

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Unionization can affect an employer’scost to providing pensions, as far more union membershave access to pension plans than do non-union workers.

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In March 2015, 72 percent of union workers throughout thecountry had access to a defined benefit plan, compared to 13percent of non-union workers.

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Sponsors paid $4.44 in pension costs per hour of labor unionworkers supplied in 2015, more than the $2.77 paid for non-unionworkers.

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The cost per hour of union labor was $2.58 in 2008.

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Pension costs are cheaper for bigger employers. Sponsors with100 to 449 workers pay $3.14 per hour of labor, and sponsors withmore than 500 employees pay $3.30 and hour.

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That’s compared to $3.43 for sponsors with 1 to 49 employees,and $4.08 for sponsors with 50 to 99 workers.

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.