WASHINGTON — Between 2003 and 2006, the rates of return for defined benefit pension plans outpaced those for employee-directed 401(k) plans, according a report released today from Watson Wyatt Worldwide, a consulting firm.
The comparison of investment rates of return between defined benefit pension plans and defined contribution plans found that the former outperformed 401(k) plans by 1.7 percentage points in 2003, 2.0 points in 2004, 1.1 points in 2005 and 1.6 points in 2006, the data showed.
Overall, from 1995 through 2006, DB plans outperformed DC plans by an average of about 1 percentage point per year over this 12-year period, which translated into a cumulative dollar difference of nearly 14% for money invested at the start of the period, according to Watson Wyatt Worldwide.
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The analysis is based on form 5500 financial and pension disclosure data released by the U.S. Department of Labor. Only companies that sponsor one DB plan and one 401(k) plan, each with at least 100 participants, were included in the data.
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