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Unlike Death and Taxes, Pensions Are No Longer Guaranteed

Knowledge at Wharton·@HashtagPLUS·about 1 month ago
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IBM. Verizon. Sears. Hewlett-Packard. Motorola. The list of corporations that have put a halt to guaranteed pension plans comes as a jolt to Baby Boom employees entering what they thought would be their peak pension-building years. At the same time, new accounting rules and Congressional legislation are being drafted to close the U.S. pension-funding gap, now estimated at $450 billion. While some proposals under discussion could make it easier for companies to discontinue defined-benefit plans, others would create incentives to support investment in defined-contribution programs, such as 401(k) plans, according to Wharton faculty and pension experts. Olivia Mitchell , director of Wharton’s Pension Research Council, says the recent rush to freeze guaranteed pension benefits is a continuation of a long-term trend in abandoning defined-benefit plans in which workers receive a guaranteed retirement payout.…

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