Lessons for Retirement Security from Well-Regulated Pensions
By Andrew G. Biggs
The near disappearance of traditional defined benefit pensions is often treated as a loss for retirement security. This paper asks a different question: whether workers and employers value guaranteed pension benefits enough to bear their full economic cost. ERISA made private pensions more secure but also more expensive, after which traditional plans declined sharply. Meanwhile, workers with defined contribution accounts generally do not recreate DB features through higher saving, conservative portfolios, or annuitization. These patterns do not prove that DB pensions lack value, but they suggest limited willingness to pay the marginal cost of sustaining guarantees under economics-based funding standards.
Source SSRN
