Traditional Pensions on the Wane

Traditional defined benefit pensions are loosing ground steadily to defined-contribution models, according to recent findings from the Employee Benefit Research Institute (EBRI).
Studying retirement plan trends from 1975-2001, researchers found that although the number of total plan participants remained consistent and assets grew, the number of DB plans decreased to 36,000 in 2001, compared to 175,000 in 1975.
Government regulation, risks associated with funding and managing pension plans, and a greater employee appreciation and demand for DC plans have spurred the DB decline, according to EBRI.
In addition, as employers increasingly discard the paternal role associated with managing pensions, the DB plans that remain are shifting toward offering lump-sum distributions upon job termination, rather than a guaranteed monthly retirement benefit, the research shows. This trend will affect the retirement security of future generations, as workers rather than plan sponsors become responsible for making assets last throughout retirement.
To order the full report (EBRI Issue Brief 249), call 202-659-0670.