Read time: 3 minutes
Why are pension plans changing?
What are pensions plans changing?
The end of a trend?
The long-term trend has been toward closing pension plans to new participants and then freezing new benefit accruals. But we’ve noticed two developments running counter to that trend:
- According to government filings, the percentage of open and ongoing pension plans has begun to level off at about 50%. This leveling off may indicate that sponsors who maintained open and ongoing pension plans after the global financial crisis, the introduction of more stringent funding and reporting regulations, and the increases in Pension Benefit Guaranty Corporation premiums are “true believers” in defined benefit plans and more likely to maintain them in the future.
- We’ve noticed a large increase in the number of cash-balance pension plans covering a small number of participants. Anecdotal evidence suggests that this type of plan has become popular with partnership firms such as doctors, lawyers, and financial service professionals, allowing them to benefit from more favorable tax treatment and higher allowable contributions than defined contribution plans.
- All investing is subject to risk, including the possible loss of the money you invest.
- Diversification does not ensure a profit or protect against a loss