Do Companies Still Offer Pensions?

I haven't heard much about pensions lately, but then I saw an article on SHRM's website this morning saying 60% of corporate pensions are now closed to new entrants. Are pensions quickly becoming a benefit of the past, or is this just a reflection of our current economic climate? What will happen when organizations no longer offer this option for retirement?

Answer

Robert Keahey (IT, Business and Social Strategist/Commentator, SummaLogic LLC)
I'm not aware of very many companies offering pensions, and I don't think it's a reflection of the current economic situation. Pensions are very expensive. As a result, the pension funds must invest in somewhat 'high risk' portfolios to maintain even the minimum funding requirements. When the market turns downward you see the results, and ultimately end up seeing pension funds suing portfolio companies for mismanagement. Not a good thing...

As we have seen in many cases, the burden of not only retirement planning, but also day-to-day expenses such as health care premiums, are being shifted to the employee. Now there are examples of exceptions - many of which exist right here in Silicon Valley (http://www.businessinsider.com/chart-of-the-day-google-cash-cost-per-employee-2011-4) - that defy those trends (and logic in many cases).

What will happen when organizations no longer offer this option for retirement? Well, I think that time has already come and gone. At least companies are still offering 401(K) programs, but matching contributions are also becoming a thing of the past. So for employees looking for a 'reliable' retirement program, the options are few and far between. If you're lucky enough to be in a hot industry segment and can land a job at Facebook, Zynga, Google or the likes, then you can enjoy the entitlements that come with them. But even those can be short-lived. Just look at companies such as Apple and VMware, where stock options are now enjoyed by fewer and fewer employees.
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2 Additional Answers
Timothy Gay (Strategic Procurement Manager, Navy Federal Credit Union)
Pensions are indeed a thing of the past. There is strong anti-pension sentiment in CEO offices throughout the business world and until the crash in 2008 the younger generation of employees wanted nothing to do with pensions. An employ matched 401k is rather mobile and the younger workers of today have been told from birth that they will have 9-10 different jobs in their lives. The idea of working for one company your whole career is absurd to them and most feel that if they do not change companies within 5-6 years, their resume is a disaster. So, the company no longer wants any long term commitment to fund an ever ageing and longer living employee group and until the last four years most employees were absolutely certain they could make a whole lot more money for future retirement if they were free to invest payroll deductions as they please. News of pension funds going broke have not helped things either.
Mark Herbert (Principal, New Paradigms LLC)
Caty,
There are still a very few organizations offering 'pensions' or defined benefit retirement plans. You most commonly will find them in the public sector, not for profits, and industries with a strong collective bargaining or union presence.
To the point others made there are a lot of reasons why companies are either discontinuing them or discontinuing enrollment.
- They are expensive. You are guarenteeing an annuity to the recipient with out regard to economic circumstances
- They don't really require any participation on the part of the beneficiary. Progressive companies are trying to educate employees more about things like retirement and health care and less like dependents.
- They are expensive to track and administer and don't lend themselves to 'portability' in a world where people don't stay with one employer for life.

The move away from these types of 'defined' or guarenteed benefits really started happening in the seventies and eighties as a result of tax code changes which required organizations offering these benefits to fund them through accrual creating a huge cash drain.

I think you will begin to see more 'employee directed' solutions in retirement and health care where employers make contributions, but employer and employee'partner' to get the outcomes the employee desires. This means that we need to do a better job of educating employees and providing them with the right tools to make good decisions.
Properly done I see this as a positive- you 'partner' with your employees and treat them as a peer or respected adult not a dependent incapable of making good decisions, The key is giving them good tools...
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