Monday, April 16, 2007

Report: Defined Contribution Plans not a Sufficient Alternative to Defined Benefit Plans

The Society of Actuaries (SOA) and the SOA Pension System Council argue that old pension models are becoming irrelevant as the retirement landscape in the U.S. changes according to this article from

Defined contribution plans do not manage retirement risks and fall short of being a sufficient replacement for defined benefit plans, which employers have been abandoning in droves, the preliminary results of recent report suggests.

"Fewer companies are able to offer the 50- or 80-year commitment of a defined benefit plan, so that burden is increasingly transferred to employees through defined contribution plans," said Emily Kessler, author of the report, in a news release. "But defined contribution plans are just savings vehicles, and they are inefficient in terms of managing retirement risks and difficult for many people to manage successfully on their own."