SURVEY SAYS: Do You Have a Pension Plan?

Last week, I asked NewsDash readers, “Do you have a defined benefit (DB) pension plan from a former or your current employer?” I also asked: “Do you believe all employees should be offered a pension plan?”

Nearly half (46%) of responding readers work in a plan sponsor role. More than one-quarter are recordkeepers/TPAs/investment consultants, 19% are advisers/consultants, 5% are attorneys and 3% are CPAs.

More than six in 10 respondents reported that they have a defined benefit (DB) pension plan from a former or their current employer? More than half (54%) indicated they believe all employees should be offered a pension plan. However, nearly one-third (32%) said they did not believe all employees should be offered a pension plan, and 14% said they don’t know.

The majority of the readers who chose to leave comments agree that a pension plan offers a more secure retirement for participants. However, several point out the regulatory and cost factors that prohibit employers from offering one or make employers want to stop offering one. There were quite a few readers in support of DC plans, though, and several remarked that participants have to do more to save in DC plans while others noted that some participants can’t. Editor’s Choice goes to the reader who said: “Sometimes the cost of maintaining such a plan is so much higher that it is just easier to offer a DC plan. At least, they are offering something. I would rather that they offer a DC plan than no plan at all.”

A big thank you to all who participated in the survey!

Verbatim

While I do have a pension plan with my current employer, they are freezing it as of the end of next year, replacing it with a cash balance formula.

There is no doubt that a DB plan combined with additional savings (401(k)) provides more security for workers. When I look at what we (my wife and I) have saved, if we also had a DB plan (neither of us do), we would likely consider retiring several years earlier than planned. The old three-legged stool of DB, SS and personal savings is, in my opinion, the most secure option.

I think it provides better retirement stability.

While it would be wonderful for all employees to have a pension plan, I realize it is not economically practical. It would put many businesses out of business.

Through defined contribution plans, we’ve allowed participants to potentially accumulate a lot of assets. Then, we leave them on their own to manage those assets in retirement. How do they make sure they’ll have lifetime income? A defined benefit plan takes that worry away from the participants.

This comes down to individual responsibility. DB plans placed little responsibility on the participant. The transition to DC plans moved that responsibility from the employer/plan sponsor to the participant. With appropriate and responsible actions by the participant, DC plans can offer the same level of retirement security as DB plans. Then again, individual responsibility is a forgotten value for many in our society…sadly.

I’ve been working in the pension world since 1982, but only have two very small pensions from past employers to show for all of this time. I’m glad I’m able to save in my 401(k) plan but feel bad for the lower-paid employees at many companies living paycheck to paycheck that cannot.

I think a DB pension is what most people need because so many people are poor savers. I think if an employer can afford to offer a DB pension benefit it would be good to do so.

It should be a mandatory issue for all, DB plans when designed and funded appropriately are better options, we also fail to look at what went wrong and in most cases, the DC plans we put in place cost the employer more than the DB plan would have had the employer made contributions. DC plans only give the finance dept comfort. Of course, they were the group which overestimated investment return so they could reduce costs to 0 until they were forced to catch up.

Defined contribution plans do not provide retirement income sufficiently. Everyone should have at least one defined benefit plan’s income stream before retiring.

My employer offers both a defined benefit pension plan and retiree health insurance benefits. Working in the HR department, we find that new hires, especially those earlier in their careers, ask if they can forego the pension benefit in exchange for a higher wage which we don’t allow. Employees are required to contribute towards the pension. I know that I am lucky to have these benefits, but many people don’t see the value in them. It’s important for employers to offer a mandatory pension plan that does not allow for loans. Unfortunately, if people aren’t forced to save for retirement, many of them won’t.

As a pension actuary, my answer is “Yes.” However, in reality, I do not believe that employers should be forced to provide a pension plan. Social Security already exists as a forced pension.

Small and medium size companies are not in a position to manage, let alone fund, a DB plan. DC plans are great tools for retirement, but the participants must participate! That doesn’t seem like all that much to ask.

The cost of administering a traditional pension plan and the continued funding that goes along with it has seen its better days. I think the better option for employees today is for companies to provide a higher match on their employees’ 401(k) contributions. This would provide a better incentive for employees to contribute to their 401(k). Unfortunately, with the pandemic, employers have used this excuse to either suspend or reduce the match on 401(k) plans and it will have devastating impact on employees’ retirement funding in the years to come.

I believe that all employers should consider a generous benefits package consisting of health, retirement, and other benefits. However, each employer has to deal with its own circumstances, so I can’t vote “Yes” on Question 3.

It would be nice for more employees to have a pension plan, and I wish I had one, but to say ALL employees should have one concerns me for compliance and administrative reasons.

I think a mix of DB/DC plans is best. DB plans offer employees more baseline retirement financial security, while DC plans provide higher earnings potential.

At what point do we ask employees to take care of themselves? I’d love to have a pension, but I’m saving for retirement and at times it is a struggle. Put the money into savings instead of getting a bigger, better TV.

Sometimes the cost of maintaining such a plan is so much higher that it is just easier to offer a DC plan. At least, they are offering something. I would rather that they offer a DC plan than no plan at all.

DB plans were a great benefit back in the days of having one employer for life. Now that employees job hop so frequently, I am not sure that DB plans continue to offer the same benefit they used to offer. And I think employers can honestly feel that their contributions to Social Security constitute a pension benefit. At least Social Security carries forward from employer to employer. I do think employees need to take some responsibility for their savings. DC plans could be designed to be more restrictive so there would be much less leakage and such plans could provide a more meaningful benefit.

Pension plans are the very best way to fund a retirement. I am lucky enough to be covered by an active plan. The rules and regulations are overwhelming at times. Not sure how a small employer with limited resources could manage a DB plan. If the cost volatility didn’t get them, the regulations would!

To give employees DB pensions again would require such a fundamental shift across the different agencies, company leadership, and shareholders that I doubt I’ll see it happen in my lifetime. I won’t argue that it’s a more efficient way to deliver retirement benefit value, but the past thirty years have been spent making it more difficult to have an active DB plan. It would take something truly transformative, such as a hyperinflation, to get back to it.

90% of people have no idea how much they will need for retirement or how to get there. Pensions take care of that. Paternalistic? Yes. Necessary? Of course.

Since government employees are offered a pension plan, the private sector should be offered one as well. Should be combo DC/DB. Since employee turnover is prevalent these days, many employees would not accrue a huge benefit.

For employees who might not feel they have the resources to put towards an individual retirement plan, this could be a game-changer at retirement.

It’s a nice base upon which employees may add savings for a secure retirement. I’m fortunate in that two of my prior employers offered pension plans from which I have pending accrued benefits. My current employer offers a pension plan too.

A cash balance pension plan could offer better security than the match on most 401(k) plans or profit sharing plans as contributions are required to meet funding levels.

When designed and managed correctly, DB plans are the most efficient and effective way to deliver retirement security to participants.