More on Pensions

I just found this NY Times article from April tracing the history in the change in American retirement pensions that I wrote about earlier today.

American workers now put more money into pension and retirement savings plans sponsored by their employers than the companies themselves do.

That remarkable milestone, determined by pension researchers reviewing the most recent data, shows just how far companies have moved away from the system of decades past, in which employers alone financed the retirement savings of their workers, and toward 401(k) and similar retirement plans financed mostly by workers.

The milestone is all the more remarkable because 401(k)’s and similar retirement accounts were never intended to be the main way for an employee to save for retirement. They were originally expected merely to supplement company-financed pension plans.

The new-style plans lack the protections of the old pension plans, like a guaranteed benefit and federal insurance to protect retirees if the company goes bankrupt.

The newer plans, known as defined contribution programs, shifted to employees the burden of investing the money to cover their living expenses at retirement, thereby saving companies the cost of managing that money over an employee’s entire life, as well as the cost of premiums for federal pension insurance.

Companies also found that they could trim costs further by cutting the amount they contributed. Now, on average, companies put up less than 50 cents for every dollar set aside by employees, and many companies make their contributions in the form of their own shares, rather than cash.

It’s fun looking at an article from back in April. Here’s how it ends:

Though Congress is preparing to take up the subject in coming weeks, there is considerable doubt that substantive change will come out of the Enron collapse. “I don’t think that we’ll get more than a Band-Aid or two,” said Pamela Perun, a pension lawyer who works as a consultant for the Urban Institute.

Yeah, right, substantive change resulting from the Enron collapse. Right. Duh.