A frozen plan is a pension plan in which the employer stops some or all future benefit accruals. Learn what a frozen plan means, why companies use it, and how it affects retirement benefits.
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A frozen plan stops some or all future pension benefit accruals. Learn how soft, partial, and hard freezes work and what they mean for your retirement.
A Frozen Plan is a type of employer-sponsored pension plan where the company decides to stop — or “freeze” — future benefit growth for employees. While the plan itself still exists and the benefits already earned remain protected, employees generally won’t accumulate additional pension credits from that point forward. This concept is increasingly important as many companies shift from traditional pensions to more predictable cost structures like 401(k) plans.
Below is a simple and easy explanation of how frozen plans work, the different types, and what employees can expect.
What Is a Frozen Plan?
A Frozen Plan is an ongoing defined benefit pension plan in which the employer halts future benefit accruals for some or all participants. In other words, employees keep the pension benefits they’ve already earned, but the plan stops growing for the future.
People searching for terms like “what is a frozen pension plan,” “pension freeze explained,” or “how pension benefits work” often want to understand what happens to their retirement income when a freeze is announced.
A frozen plan can be implemented in several ways, each affecting employees differently.
Types of Frozen Plans
1. Partial Freeze
A partial freeze affects only some groups of employees. The employer may freeze the plan for:
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Certain job classifications
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Employees at specific plant locations
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Workers with fewer years of service
Example:
A manufacturing company freezes pension accruals for new plant workers but continues accruals for long-term employees.
2. Soft Freeze
Under a soft freeze, future benefit accruals slow down rather than stop entirely.
Employees may still get increases due to wage growth, but they no longer earn additional benefits for service after the freeze.
Example:
An employee’s pension might still rise slightly each year due to higher pay, but years worked after the freeze do not count toward additional benefit credits.
3. Hard Freeze
A hard freeze is the strictest type.
No participant—new or current—earns any additional pension benefits. The plan is still maintained, but it stops growing entirely.
Example:
If your pension was worth $1,200 per month at the time of the freeze, it will stay $1,200 (adjusted only if the plan includes cost-of-living increases).
Frozen Plans vs. Closed Plans
Many frozen plans are also closed to new entrants, meaning no new employees can join.
However, a plan can be closed without being frozen.
Example:
A company may close the pension to new hires in 2025 but continue granting benefit accruals to existing employees until 2030.
Even though the plan is closed, it isn’t considered fully frozen — but it is often grouped together with freeze strategies because the employer is limiting future liabilities.
Why Do Employers Freeze Plans?
Companies freeze pension plans for several reasons:
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Rising long-term funding costs
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Desire to shift to defined contribution plans like a 401(k)
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Corporate restructuring or cost-control measures
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Lower investment returns increasing pension liabilities
Freezing a plan helps employers predict retirement costs more accurately while preserving benefits already earned.
What a Frozen Plan Means for Employees
When a pension plan is frozen:
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Benefits earned before the freeze remain protected.
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You may still receive payouts at retirement age based on the frozen value.
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You generally stop accumulating new benefits (depending on freeze type).
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If you change employers after a freeze, your pension amount won’t increase.
This means employees need to plan for supplemental savings, often through 401(k)s, IRAs, or other retirement accounts.
Summary
A Frozen Plan is a pension plan where the employer stops some or all future benefit accruals. It may take the form of a partial freeze, soft freeze, or hard freeze, each affecting employees differently. Although the plan still exists and earned benefits remain safe, employees typically need to rely more on personal savings and other retirement programs going forward.
Understanding how frozen plans work helps workers make informed decisions, adjust expectations, and better plan for long-term financial security.
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