#BRNAM #1244 | Is there a resurgence of DB pension plans? | John Lowell, October Three Consulting | #Tunein: broadcastretirementnetwork.com or your #favorite #streaming / #podcast / #smarttv / #localtv / #digital #platform…(read more)

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In recent years, the shift towards defined contribution (DC) pension plans has been significant. However, a new trend has emerged which suggests a possible resurgence of defined benefit (DB) pension plans.

DB pension plans are retirement plans that provide a specific monthly benefit upon retirement, based on a predetermined formula which usually takes into account an employee’s salary, years of service, and age. On the other hand, DC plans are retirement savings plans that allow employees to contribute money towards their retirement and receive contributions from their employers, but the final pension benefit depends on investment performance.

According to a survey conducted by Willis Towers Watson, 23% of employers may consider adding DB plans to their retirement benefits lineup in the future. The study also found that 74% of employers felt that their current retirement benefits are not adequate to support employees’ retirement readiness.

Several factors are contributing to this trend, including a desire to offer more predictable retirement income to employees, concerns about employees outliving their retirement savings, and changes in legislation making it easier for employers to offer hybrid retirement plans that combine elements of both DB and DC plans.

Furthermore, the COVID-19 pandemic has exposed a weakness in DC plans, as market volatility and economic uncertainty have caused many employees to withdraw money from their retirement accounts or reduce their contributions. On the other hand, DB plans provide a steady source of retirement income unaffected by market conditions.

However, DB plans are not without their own set of challenges. They are generally more expensive for employers to fund, and can potentially pose a funding risk in the event of an economic downturn or unfavorable demographic trends.

In conclusion, while the trend towards DC plans has been significant in recent years, there is a possibility of a resurgence of DB plans. Employers are recognizing the need to provide more predictable retirement income to their employees, and new hybrid plan designs are making it easier for employers to combine the advantages of both types of plans. However, the decision to offer a DB plan is not one to be taken lightly and should be carefully considered in light of the employer’s financial situation and goals.