The younger you are, the less retirement security you’re likely to have as employers accelerate efforts to shed costly pensions and replace them with alternatives that make workers shoulder more of the risk and responsibility, Axios reports.
Companies have long been moving away from traditional pensions, where retirees are guaranteed a certain level of benefits, and replacing them with 401(k)s and other retirement savings accounts, which are more vulnerable to the ups and downs of the stock market.
Lately however, those changes are happening even faster because of a perfect storm of circumstances ranging from lower interest rates to higher longevity rates. These changes are prompting corporations to offload their pension plans by selling them to insurance companies and offering lump-sum payments to some workers.
The insurance company pays retired workers an annuity that is equal in value to the pension they’ve earned, but the workers lose certain safeguards, like the backstop of the Pension Benefit Guaranty Corporation, the agency that steps in if a company can’t pay.
“Companies are looking to get those defined benefit plans off their books,” Robert Falzon, vice chairman of Prudential. “It’s a multi-trillion dollar market that will continue for some period of time.”
In Baton Rouge, dominated by small businesses, defined pension plans are nearly extinct. The state and city-parish government, however, still maintain guaranteed retirement benefits.
Among Fortune 500 companies, only 81 sponsored a pension plan in 2017, down from 288 in 1998, according to Prudential. At the same time, the number of pension risk transfer deals rose to 493 in 2018 from 203 in 2012, according to the LIMRA Secure Retirement Institute, a nonpartisan research center. Read the full story.