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Defined benefit pensions are still a popular form of retirement income, with 25 million people benefiting from these plans, which hold $11.8 trillion in plan assets and pay over $600 billion in benefits annually. While pensions are less common in the private sector, they remain prevalent among state and local government workers. Despite claims of their decline, the reliability and value of DB pension plans are being reevaluated, particularly in the wake of a Senate Health, Education, Labor, and Pensions Committee hearing on the impact of fewer pension plans on retirement security.

Following the Senate committee hearing, a report was prepared by the National Institute on Retirement Security, which outlined six potential actions Congress could take to boost pensions in the private sector. These actions include lowering PBGC premiums, acknowledging risk-sharing plans, allowing greater flexibility in funding surpluses, permitting pretax employee contributions, and affirming that retirement benefits should be transferable between defined contribution and pension plans. Together, these actions could increase the availability of pension plans by addressing employer concerns about funding.

The status of corporate pension plans is currently strong, with many plans reporting funded ratios well above 100 percent. Rising interest rates have posed challenges for some consumers but have helped strengthen pension plan funding. Discussions about the role of pensions in employee compensation have restarted, highlighting the recruitment and retention benefits that pensions offer employers in today’s competitive labor market. Workers value pensions, with 90% saying it makes them more likely to stay in their job, and 57% preferring a job that offers a pension over a 401(k) plan.

The recent decision by IBM to end its 401(k) contributions and reinstate its cash balance pension plan has sparked interest in other private companies following suit. A positive signal from lawmakers promoting pension plans could lead to more companies adopting them, which could enhance retirement security for workers and be financially beneficial for the companies. Pensions provide an economically efficient way of delivering retirement income, benefiting workers through risk pooling and asset management, as well as companies by providing retirement benefits at a lower cost.

Congress has a pivotal role in creating a supportive policy environment for pension plans, with recent interest from lawmakers showcasing a willingness to bolster these plans. The Senate HELP Committee’s exploration of policies to increase pension availability in the private sector is a promising step towards enhancing retirement security for working Americans. With the potential implementation of the policy recommendations outlined by the National Institute on Retirement Security, there is a pathway to strengthening pension plans and addressing the retirement savings crisis. This renewed focus on pensions highlights their value in ensuring retirement security and supporting a stable and resilient workforce.

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