It has recently been reported that 63% of private industry participants in defined benefit (DB) plans were in plans still open to new employees. Are we supposed to be impressed with that finding? Regrettably, only 18% (according to BLS data) of the private sector workforce are in DB plans at all. Given that, it isn’t impressive that 63% of 18%, which is only 11.3% of the workforce, are currently in an open DB plan. Roughly 30 years ago, the U.S. had more than 146,000 DB plans covering 46% of the private workforce.
The move away from DB plans may be comforting for senior executives at public corporations who don’t want the volatility of contribution expense to impact their companies quarterly financials or the liability on their balance sheets, but it does little for the average American worker. DC plans are not better than DB plans, especially when our industry and public education system have failed to provide adequate financial literacy for our workers.