The trend continues, the defined benefit pension is dying a slow death and with its passing will come a changed society, a changed workforce and millions more Americans left on their own to fund and manage their retirement income. Watson Wyatt reports that even among Fortune 1000 companies, the number sponsoring a defined benefit plan has dropped from 59% to 42% between 2004 and 2009 and more have eliminated them for new hires.
You can imagine the reasons for all this, but it all comes down to one thing, earnings for the next quarter are more important than the employees who may have counted on these programs for the last several decades. Just as pensions are funded over many decades so there should be a long-term commitment to workers, in some cases even before a commitment to shareholders who know or should know about these obligations before they invest. One may make the case that when there is a true survival situation it is better to keep a Company going and freeze a pension plan and I can buy that, but otherwise, a deal is a deal in my view.
I frequently sound the call of unintended consequences and this is a good example. A myriad of laws and regulations related to funding, reporting, disclosure etc. intended in large part to protect plan participants, have in reality contributed significantly to the demise of the pension. The same holds true for retiree medical, accounting rules designed for transparency, killed this coverage and while the majority of Americans never had this benefit, its elimination will have a profound impact on future generations and on the future workforce.
Better prepare for a “normal” retirement age of 80. Are the halls wide enough for those mobile chairs?