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Do Pensions have a Future?

Do Pensions have a Future?. We’re living longer, healthier lives. + 22%.

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Do Pensions have a Future?

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  1. Do Pensions have a Future?

  2. We’re living longer, healthier lives +22% Sources: PBGC calculations based on data from Center for Retirement Research at Boston College Issue Brief titled “What’s the Average Retirement Age” and Census Bureau data on historical gender differences in the workforce

  3. Most private workers have no retirement plan. Most of those that do have a DC plan without lifetime income. Percent of Private Wage & Salary Workers in Pension Plans Source – EBRI

  4. Weaknesses of Current DC Plans People Aren’t Pension or Investment Experts Underestimate Retirement Needs Don’t Save Enough Running Out of Money When it’s Too Late Higher Fees = Lower Returns No Lifetime Income No Risk Sharing

  5. 75 million stillin DB plans, including 36 million active workers Active workers in millions

  6. The Ice Age Myth? More than 3/4thsof people in private plans are still accruing benefits Includes multiemployer participants Source: PBGC premium filings. Data primarily as of beginning of 2012 plan year

  7. Why are Employers Quitting DB Plans? Need to Share Costs with Employees Funding Requirement (Un)predictability Effect on Financial Accounts Complex Regulations & Legal Risk Portability 7

  8. Aren’t there alternatives to traditional DB & DC plans? Traditional Pensions Hybrid Options Defined Contribution 401(k) 403(b) Profit Sharing Plans Final Pay DB Plans • 401k’s with lifetime income • Cash Balance Plans • Pension Equity Plans • Floor Offset Plans

  9. 10 Million in Multiemployer Plans 3 Million in Distressed Plans ~1½ Million in Plans Likely to Fail Millions

  10. What Can We Do?(Josh’s List, not PBGC’s) • Preserve the plans we have Save Multiemployer Plans • Admit employer limits More Flexibility & More Options Less Legal & Financial Responsibility • Most people aren’t Warren Buffett Warn about the dangers of lump sum payments Less “choice”. More auto-enrollment “Plan” less. “Save” more • Bring back lifetime income

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