Plan Advisor, October 31, 2008
Rebecca Moore freezing a defined benefit pension plan might not reduce costs.
A NIRS research brief says freezing the DB plan in favor of a defined contribution plan could involve increased costs, reduced benefits, or a combination of both. “Look Before You Leap: The Unintended Consequences of Pension Freezes,” specifically says that freezing a DB plan and moving to an individual defined contribution (DC) plan can:
- increase costs to employers and/or taxpayers due to higher costs of operating two plans, erosion of economic efficiencies, and front-loaded contribution requirements;
- further exacerbate retirement insecurity concerns, which in turn can hamper worker recruitment and retention effort, result in higher turnover rates, create labor shortages, increase training costs, and lower productivity levels.
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