Time to Bring Back Pensions

and either abolish the completely inadequate and scamming 401(k)s as sole retirement vehicles (apart from Social Security).

The defined contribution plans were never designed to be pensions at all but savings plans to supplement traditional pensions. Thanks to our wonderful Congress's lack of foresight, companies soon found loopholes in federal law and started ditching their pension plans in favor of these do-it-yourself scams in order to save money.

Another thing Congress better keep a close watch on are public employee pensions. They are NOT covered by the PBGC, unlike private pensions. If a state decided to ditch its pension plan tomorrow, retirees there would be without anything from them and get no help from the feds. This would be especially disastrous for retirees in states that don't pay into Social Security at all.

I am glad at least one employer has decided to reverse the trend to force workers into 401(k)s:

This helps explain why the members of the Society of Professional Engineering Employees in Aerospace (SPEEA) voted down the recent contract offer from Boeing. Boeing proposed to replace defined benefit pensions with deferred compensation for new employees. The impact of Boeing’s contract proposal would have been to cut its contributions for retirement for these new employees by about 40 percent. Putting all these employees’ retirement eggs into deferred compensation leaves their accounts at the mercy of the stock market. Even as they gain value, they also create long-term retirement insecurity.

If an employer wants to guarantee retirement income, then it is a lot less expensive through defined benefit plans rather than through deferred compensation. That’s because with deferred compensation, each individual has to have an account that separately anticipates his longevity. Each individual account has to be enough for a long life for each employee.

Compare this to defined benefit pensions. These pensions pool all the funding to finance an average employee’s retirement years. All retirees are taken care of. They can depend on their monthly stream of income, no matter how long they live. For instance, at Boeing, if you work 20 years, the minimum retirement benefit is $1,660 a month. The “herd” of the defined benefit pension protects the individual retiree.