DB Pensions Garner New Respect as DC Plans Falter
Employee Benefit News (11/02) Vol. 16, No. 14 p.33; Lee, Karen

As corporate scandals and falling stocks have caused 401(k) balances to decline, they have also increased the allure of defined benefit (DB) pension plans. Despite the known risks involved with funding and managing a pension plan and the decrease in the number of DB plans over the last 20 years, the Society of Pension Actuaries says that as 401(k) balances have fallen, employees' interest in DB plans has increased by 20 percent. The security offered by DB plans, over the currently less secure defined contribution (DC) plans, can give employers that offer both pensions and 401(k)s a competitive advantage in attracting employees who are interested in security. One expert says that along with personal savings and Social Security, pensions form a strong base for retirement planning, and argues that the next 15 to 20 years will see an upsurge in DB offerings provided by employers. Employees can find it difficult to understand their pension plans and employers would do well to offer education, more frequent statements, and guidance with pension plans to employees, the experts say. The Internet is an excellent vehicle for employee education on DB plans. To attract younger employees, who may not be keen on staying at a company for 30 or 40 years in order to collect a pension, the experts suggest that employers offer alternative cash balance plans that allow employees to turn their pensions into cash balances and transfer their savings when they transfer jobs.


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