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Pension plans really are the best plan for employees and their retirements



By Dian Vujovich

I wrote a book about retirement more than a dozen years ago and my feelings then—and today—have favored defined-benefit plans (DB) over defined-contribution (DC) ones. Yes, DBs are more costly to administer but they are the right choice of employers who really understand the intrinsic value of their employees, the fact that it is the little guy and gal who really are responsible for a company’s success and that most aren’t particularly savvy when it comes to making long-term investing decisions.

Two recent studies drive those points home. One, from Allianz Life Insurance, found 61 percent of Boomers had a greater fear of outliving their savings than they did of dying. Plus, roughly one-third had no idea of how much life in retirement would cost them or how long their retirement income would last.

The second, a survey from Towers Watson, a global consulting firm, revealed that because defined-benefit plans “were professionally managed, they achieved superior investment performance when stack up against individual investors in 401 (k) plans who were left on their own to decision how much to save, how to invest their funds and how to modify investments over time…”

Results also showed only 17 percent of Fortune 100 companies continue to offer direct-benefit plans—down from 67 percent in 1998. (As a reminder, in a defined-benefit retirement plan, it’s the company’s responsibility to create, select, manage and fund the plan for its employees. These plans typically require an employee to be vested, i.e., work a specific number of years at the company, before they become eligible to participate.)

In this something like 20-year era of mergers and acquisitions in which greed has been considered good, corporate cost-cutting reigned in order to make the deal and one where it has been the price of a company’s stock that mattered more than the company’s employees or quality of products produced, I think it’s time for a change in corporate culture.

Wouldn’t it be terrific to enter an era in which the product a company makes or services it provides—and the employees who make it or provide those services–are valued more than the stock’s price by those running the company? And, one that would translate into more companies offering defined-benefit retirement plans to their employees? I’d bet that doing so would renew a pride in made-in America products, result in happier employees with more fulfilling retirement coffers, less attrition and in time higher company stock prices.

Until that catches on, if you’re looking for employment, know someone who is or has a recent high school or college graduate in your family doing the same, directly them towards a big company that offers defined-benefit retirement plans might be wise. A few names of major companies that still do include Exxon Mobile, AT&T, Verizon, Ford, Johnson & Johnson, and Pepsi.


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