As employers move away from traditional defined benefit pension plans in favor of defined contribution 401(k) plans, the number of frozen pension plans is rapidly increasing. While most companies would like to rid themselves of their pension plan liabilities, more often than not, employers deem it too costly to terminate their existing plans and pay out all accrued benefits to participants and beneficiaries. As a result, instead of terminating their existing pension plans, many employers are electing to “freeze” their plans. Pension plans may be frozen using a “hard freeze” or a “soft freeze”. While both types of plan freezes result in cost savings for a company, a plan freeze also results in the elimination of future benefit accruals for one more groups of employees. This fact sheet will explain the differences between a hard freeze and a soft freeze, as well as discuss other plan freeze considerations and your options going forward.
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Pension Action Center, Gerontology Institute, University of Massachusetts Boston, "My Company is Freezing the Pension Plan: What does this mean?" (2017). Pension Action Center Publications. 3.