An Ugly Example of the Dangers of Defined Benefit Pensions
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  • Corlyss

    “If the workers had defined contribution plans rather than defined benefit ones, their financial future wouldn’t be tied to the health of the company they work for.”

    Yes, but defined contribution plans have their own pitfalls. First of all, they depend on the ability and willingness of the worker to save. Now I ask you, if people were all that good at saving, would we be in this mess at all? We might be in a different mess, but we wouldn’t be in the mess created by the combination of peoples’ natural inclination to spend, spend, spend and pressures inherent in an economy that is 70% dependent on consumer spending. Second, even if people are willing and able to save, most defined contribution plans limit the amount the pensioner can contribute as a way of limiting the amount the company is obligated to match. E.g., in the federal government’s FERS pension, the last time I looked the maximum the government would be obligated for was a matching contribution of 10%. IOW even if the worker could afford to contribute 12% of their income to their pension, the government’s contribution would still be only 10% of the workers income.

  • crocodilechuck

    Of course, as the tenured James Clark Chase Professor of Foreign Affairs and Humanities, Mead is the recipient of defined benefit pension from Bard College himself. Going to ‘unlock yourself from this increasingly dysfunctional old model, WRM?

    • Walter Russell Mead

      @crocodilechuck: You would look a lot less like a fool and a blowhard if you took the trouble to get a few facts straight before making ugly remarks about people you don’t know and situations you don’t understand. Like a great many colleges and non-profits, Bard offers employees a defined contribution plan. I like this plan better than a defined benefit plan and I have no wish to change. My recommendation of these plans is based on personal experience.

      Anybody can be wrong, Mr. Chuck. It is a choice to be uncivil. Continuing to make that choice will hurt your career prospects and personal relationships in many costly ways; it will also lead to your being banned on this site.

      Have a nice day.

  • lhfry

    Does this mean that the PBGC will take over the Peabody plan, and if so, what does that mean for taxpayers? I think ERISA prohibits a company from simply abandoning a defined benefit pension plan.

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