Defined benefit (DB) pension plans have suddenly gained new support, with employers, unions, and benefits experts now talking up the retirement plan model—which once was seen by many as relic of the past. Although defined contribution (DC) plans have become the standard retirement benefit offered by most employers, recent events suggest that some may take a new look at DB pensions. Forbes magazine announced a new IBM decision to return to DB plans with prominent picture of a dinosaur. The Wall Street Journal published an opinion piece with the headline: "Bring Back Corporate Pension Plans. Seriously." And Pensions and Investments asked: "Is renewed interest in DB plans real, or just a pipe dream?"

Perhaps more importantly, the demand for DB plans seems to have returned to major labor groups such as the UAW, which pushed hard to reinstate that model of pension plans for new workers with their latest contract. That effort failed, but the UAW contracts did include increases in 401(k) contributions of the employees' DC retirement benefits, and it is likely that the union will revisit the question at some point in the future.

IBM flips the script

One major topic of discussion in this area has been the decision by IBM to switch to a "hybrid" model of DB plan, which means that the company will no longer match employee contributions to 401(k) plans but will instead offer a 5% retirement benefit via a DB plan—with employees guaranteed a 6% annual interest rate for the first three years of the plan. The Forbes article noted that IBM had previously led the way in leaving the DB pension model 15 years ago for the DC approach, leading to other industry giants to do the same.