Towers Watson has produced a study highlighting the fact that only 5% of new hires in the private sector have access to a defined benefit plan (DB). The move away from DB plans to defined contribution plans has been amazingly swift. As we’ve discussed on numerous occasions, placing the burden on individuals with the marginal capability to handle this responsibility will likely create a social and economic crisis for older Americans.
According to Towers, “workers who experience a loss of guaranteed retirement income may not exit the workforce in a timely fashion—an outcome that traditional pensions were at least partly designed to avoid. Such counter-cyclical workforce trends could necessitate increased severance pay, raise benefit costs, and reduce mobility within an organization.”
In addition, as of 2015, only 20% of Fortune 500 companies still offered a DB plan (traditional or hybrid) to salaried new hires, down from 59% among the same employers back in 1998. Furthermore, there has been an uptick in plan freezes and closings since the 2008 financial crisis. By 2015, 39% of sponsors had frozen a DB plan, and 24% had stopped offering their primary DB plan to new hires.