Are Pensions Making a Comeback?

Will this year be the year that pensions make a comeback? A lot of companies are bringing them back to stay competitive in a tight labor market.

WILL 2024 BE THE YEAR OF THE PENSION COMEBACK?

"Defined benefit (DB) pensions are having a moment. Following IBM’s IBM -1.9% recent announcement that the company will resume offering a pension plan to its employees, there is much speculation that other companies will follow suit. On the public sector side, the town council in Trumbull, Connecticut, earlier this month unanimously voted to resume offering pensions to its police officers to address worrisome staffing shortages after switching a decade ago to a defined contribution (DC) plan. There’s also an active debate in the Alaska legislature about returning to pensions for public employees as the state faces a deeply troubling shortage of employees who deliver essential public services.



It shouldn’t come as a surprise that employers are reconsidering pensions. The U.S. now is fully four decades into the 401(k) experiment, and it is abundantly clear that these plans just can’t do the retirement job alone. Most middle-class Americans are unable to accumulate enough savings to be self-sufficient in retirement without a pension." Learn more

IBM JUST FLIPPED THE SCRIPT

"Defined benefit (DB) pension plans have suddenly gained new support, with employers, unions, and benefits experts now talking up the retirement plan model—which once was seen by many as relic of the past. Although defined contribution (DC) plans have become the standard retirement benefit offered by most employers, recent events suggest that some may take a new look at DB pensions. Forbes magazine announced a new IBM decision to return to DB plans with prominent picture of a dinosaur. The Wall Street Journal published an opinion piece with the headline: "Bring Back Corporate Pension Plans. Seriously." And Pensions and Investments asked: "Is renewed interest in DB plans real, or just a pipe dream?"

Perhaps more importantly, the demand for DB plans seems to have returned to major labor groups such as the UAW, which pushed hard to reinstate that model of pension plans for new workers with their latest contract. That effort failed, but the UAW contracts did include increases in 401(k) contributions of the employees' DC retirement benefits, and it is likely that the union will revisit the question at some point in the future." Learn more