New challenges: A tale of two (kinds of) plans
One of this month’s feature stories focuses on developments in the defined contribution pension fund sector (see “All about that bass”). As the story explains, the shift away from high-cost defined benefit pension schemes has been under way for decades in the corporate pension fund sector.
The shift at a given fund takes a predictable path. First, a decision is made by a defined benefit pension plan sponsor to offer its participants a defined contribution pension fund alternative in the form of a thrift, savings, 401(k) or similar type of plan. After several years, a decision is made to freeze the defined benefit plan and to offer new hires only the opportunity to participate in the plan sponsor’s defined contribution plan or plans. Meanwhile, the plan sponsor continues to make contributions on behalf of those grandfathered under the old plan agreement, a