Re:Champions of the 401(k) Lament the Revolution They Started
by toast0 on Monday January 02, 2017 @07:36PM
(#13305703)
I think this is exactly right, a defined contribution is simpler, more transparent, and less risky for the employee and the employer.
The employee knows exactly how much the employee is contributing (and if it's being contributed in timely fashion), and (vested) contributions are safe from employer bankruptcy or change of jobs. The employee still has market risk, which was present before in that a pension with poor investment results may lead to the pension being assigned to the PBGC and result in a reduced pension.
The employer benefits by paying for today's workers only today, and does not have to manage and fund the pension.
There are certainly concerns about investment costs / poor investment choices within 401(k) plans, but I think some recent litigation results are likely to improve the landscape. Good plans are available, and companies may have a duty to provide a good plan.
The employee knows exactly how much the employee is contributing (and if it's being contributed in timely fashion), and (vested) contributions are safe from employer bankruptcy or change of jobs. The employee still has market risk, which was present before in that a pension with poor investment results may lead to the pension being assigned to the PBGC and result in a reduced pension.
The employer benefits by paying for today's workers only today, and does not have to manage and fund the pension.
There are certainly concerns about investment costs / poor investment choices within 401(k) plans, but I think some recent litigation results are likely to improve the landscape. Good plans are available, and companies may have a duty to provide a good plan.