Both an attorney and human resources professional with more than15 years of professional experience, I rarely encounter completely new questions or situations.
Instead, the questions that employees ask are usually variations of a previously encountered theme. Surprisingly, however, on the same day, I was recently asked by two different prospective employees, "Do you offer a pension?"
I don't know what's more surprising, the fact that I've never been asked this question, or the question itself, but I was definitely a little taken aback by these inquiries. A member of Generation X, I admit my reaction was likely strongly influenced by multigenerational differences—another human resources hot topic—but my immediate thoughts were, "These individuals are completely out of touch with the current retirement landscape. Private employers no longer offer defined benefit pension plans."
Recommended For You
Nevertheless, the questions made me curious; so, I decided to research the topic, which revealed the following, interesting results.
- Due the weak economy and resulting corporate bankruptcies, although the general public most closely associates The Pension Benefit Guaranty Corporation (PBGC) with its role of assuming the pension liabilities of these failed organizations, the PBGC was originally created by the Employee Retirement Income Security Act of 1974 to encourage private employers to offer defined benefit pension plans.
- According to the wealth management firm SEI's Pension Lifecycle Meter released this month, only 36 percent of corporate defined benefit pension plans are active or open to new hires, while the remaining 64 percent are closed to new entrants (31 percent), frozen (30 percent), or terminating (3 percent). The closed plans do not allow new hires to enroll but participants still accrue benefits, while frozen plans are closed to new entrants and participants no longer accrue benefits.
First, although I understand that pensions are obviously valued by employees, from a strategic business perspective, they are increasingly regarded as more of a liability than an asset. Consequently, it was surprising to me that the government has historically been an active proponent of these plans.
Accordingly, the statistic that 36 percent of corporate defined benefit plans are active was a much higher number than I expected. Considering the recent headlines about corporate bankruptcies, failed plans, and the underfunded status of both PBGC and many of the existing corporate plans, it seems logical that a greater percentage of employers would be making the strategic decision, at a minimum, to close their existing plans to new participants or to transition completely to defined contribution plans.
However, a closer analysis of these numbers reveals that my logic and expectations may be correct. Because pensions are such an attractive and valued benefit to both prospective and existing employees, employers may be strategically managing this change by transitioning slowly to attempt to avoid the negative human resources implications of eliminating defined benefit plans. The difference between frozen and terminating plans in SEI's lifecycle is that frozen plans simply have not started the termination process. Consequently, it seems that the frozen status is only a transitory phase preceding termination of the plan. Adding these categories results in a statistic, 33 percent, that more strongly indicates the expected trend of employers eliminating defined benefit plans.
Considering this information, what are the implications for human resources professionals? The first lesson for me is that although my Generation X expectations are in line with the current trends, especially considering the effects of the economic downturn on older workers' ability and/or willingness to retire and the fact that many employers still offer pensions, the question is not one that should be considered outrageous.
Second, positioning human resources as a strategic business partner that can help the company effectively manage these almost inevitable changes will become more important. Although the elimination of defined benefit plans seems to be the predominant trend, the transition is slow. Pensions are an attractive benefit to employees, and many employers are still offering them; therefore, developing a Total Rewards package that offers similar appeal may be important to retain top performers as the economy and job market improves.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
