The Pension Tipping Point

As we come off the predicted news that the rate of job layoffs is slowing its time to take stock of the near term future. There are many topics from the permanent loss of many job classes due to industry restructuring to the achievement of a zero health care trend even without reform by companies that actively engage their workforce. For retirement the big news is still the old news and that is the convergence of increased reliance on DC plans and the slow demise of DB plans.

The news in the coming months will highlight the sorry state of most DB plans and the need for funding to shore up balance sheets. The result will only increase the pressure on the beleaguered DB plan's ability to act as a management tool and eliminate employers ability to shape the contours of the workforce. The DB plan is much more effective than a DC plan in providing early retirement inducements. Nevertheless as the attached press release demonstrates the DC plan as the sole retirement vehicle is now the majority even among very large employers. Yet if DB plan's assets have been decimated, we are all keenly aware that DC plan assets have been even further weakened resulting in the majority of employees having insufficient resources to retire and employers having less of a stake in their employees retirement futures.

The shape of the future is no longer driven to an outcome but instead adrift in the image of an employee's portfolio. Since this isn't good workforce management it's likely that new workforce management designs will begin to take shape.

Press release on DB plans
http://www.watsonwyatt.com/news/press.asp?ID=21177