Employee Benefit Plans Built to Last

 

As I strolled around the ancient ruins of Rome last week (one of the reasons I did not blog for a few days), I was struck by the reality that so little seems built to last. Notwithstanding the architectural glory of the Forum and Colosseum and other magnificent nods to history, our society seems focused on "new and improved." Discard the old. Bring in the new. While unlikely that benefit plan professionals strategically planned obsolescence years ago, one wonders whether retirement plans were ever built to last.

Someone recently asked me for my opinion about what he deemed the inevitable demise of defined benefit ("DB") plans. I countered "not so fast," asserting that changing workplace demographics are giving benefit design teams pause when considering whether to jettison traditional pensions. One investment committee member told me that their company engineers griped loud enough for management to reverse course and bring back the "old fashioned" but popular DB arrangement.

Unhappy 401(k) participants may likewise eventually vote by migrating to employers who offer or reinstate DB plans. Regulators are considering mandates to force employers to strengthen one part of a wobbly three-legged retirement stool. If individuals save little on their own and Social Security is on its knees, who else to pick up the slack but the private sector?

Don't laugh. If the Hula Hoop can make a resurgence with fitness buffs and even have its own magazine, why not defined benefit plans?

If and when these schemes return and/or new savings products come about (driven in large part by rules, regulations and laws), wouldn't it be great to create with permanence in mind? From a cost-benefit perspective, how much money and angst might be saved by doing it right the first time, whatever "right" turns out to be?

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