Defined benefit pensions continue to be a reliable source of retirement income and remain popular among workers, paying benefits to 25 million people with $11.8 trillion in plan assets. Despite a decline in private sector pension plans, there is a resurgence in interest as workers value these plans for retirement security. A recent U.S. Senate hearing focused on the impact of fewer pension plans in the private sector on retirement security, with a call for Congress to take action to increase pension availability in the private sector.
Following the Senate hearing, the National Institute on Retirement Security prepared a report outlining potential actions Congress could take to boost pension plans in the private sector. This includes lowering PBGC premiums, permitting greater flexibility in funding surpluses, and allowing pretax employee contributions. These actions aim to ease employer concerns and make pension plans more accessible. There is a growing recognition of the importance of pensions in retirement security, with lawmakers focusing on policies that support both defined benefit and contribution plans.
Corporate America is also rethinking pension plans, with many plans currently thriving due to strong financial markets and rising interest rates. The funding of corporate pension plans is at a strong ratio, sparking conversations about the role of pensions in total employee compensation. Employers are recognizing the benefits of pensions in recruitment and retention, with workers stating that a pension benefit makes them more likely to stay in their job. The possibility of more companies following IBM’s decision to reopen its pension plan highlights the potential for a pension comeback in the private sector.
Pensions are viewed as the most economically efficient way to deliver retirement income, benefiting workers through risk pooling and professional asset management, as well as companies by providing retirement benefits at a lower cost. Congress plays a crucial role in creating a supportive policy environment for pension plans, with recent interest from lawmakers in boosting pensions and recognizing their importance in retirement security. It is encouraging to see attention being given to policies that enhance pension availability and support workers in achieving financial stability in retirement.
It is crucial to understand the significance of pensions in empowering workers to retire with dignity and maintain a stable workforce. The push for policy actions that increase pension availability in the private sector reflects a growing awareness of the importance of retirement savings and security. By implementing recommendations to boost defined benefit pensions, Congress can support the financial well-being of working Americans and strengthen the economy. With the potential for more companies to reconsider their retirement benefit offerings, the resurgence of pensions could provide a reliable and secure source of income for retirees in the future.
