The Cow You’ve Been Milking: The Defined Benefit Pension Fund Market Is Drying Up
For more than 10 years now, this column has been warning (and I’ve been warning from the podium at our conferences and elsewhere) about the impending shift from defined benefit–based pension funding schemes to defined contribution plan–type schemes here in the United States and elsewhere.
During that time, more than 70 percent of U.S. corporate pension plan sponsors have frozen new participants out of their defined benefit plans, leaving these workers with no options for accumulating retirement savings other than their own personal savings, individual retirement accounts (IRAs), Simplified Employee Savings accounts (SEPs) and their employer’s defined contribution plans.
Tom Mackell, my long-time friend and former chair of the Richmond Federal Reserve, calls this the “YOYO” shift (as in, the shift to “your on your own”).
From my seat, this has dramatic public policy implications for a variety of reasons.