The dinosaurs are extinct. Pensions are alive and well.

Kids love dinosaurs. These larger-than-life, amazing creatures that existed some 66 million years ago proceed to fascinate children and adults alike. Just consider how dinosaurs are still prevalent in modern popular culture – within the blockbuster Jurassic Park franchise, the lovable Rex from Toy Story, and the ever-popular Barney. Not to say the countless dinosaur exhibits that remain hugely popular attractions in science and natural history museums around the globe.

Sometimes you hear defined profit pensions in comparison with dinosaurs. Like dinosaurs, pension plans are fascinating, big and robust. They are a reliable source of retirement income and remain extremely well-known amongst employees today. But unlike dinosaurs, pensions will not be extinct. In fact, pension plans are alive and well today, paying advantages to 25 million people and holding $11.8 trillion plan assetsand greater than $600 billion in advantages are paid out to retirees annually. About 90 percent of state and native employees have a pension plan. While pensions are less common amongst private sector employees than they were 50 years ago, we’re seeing a re-evaluation of those corporate retirement plans that employees like and value.

Congress takes a brand new have a look at pensions

The impact of fewer private sector pension plans on the retirement savings of working Americans was the topic of a Hear before the U.S. Senate Committee on Health, Education, Labor, and Pensions (HELP) in February. It was an honor testify as an authority witness on the role of pension plans in enabling employees to retire with dignity, helping employers maintain a stable and resilient workforce, and strengthening the economy, especially during times of market downturn.

The HELP Committee stays committed to understanding the present role of pensions within the retirement savings landscape and, following the hearing, issued a request for information (RFI) on policy actions Congress could take to extend the supply of pensions within the private sector. It is encouraging that the Committee is taking this step since it shows that it’s taking motion to assist working Americans navigate the retirement savings crisis and get their retirement preparations and savings back on target. Congress has passed two major pension policy bills lately, the Setting Every Community Up for Retirement Enhancement (SECURE) Act and SECURE 2.0, but these primarily focused on policies affecting 401(k)s and other defined contribution (DC) plans. Pensions and policies that might strengthen these plans within the private sector are actually getting the congressional attention they deserve.

The National Institute for Pensions (NIRS) went to work after the hearing and ready a report in response to the HELP Committee’s RFI. This report, Policy ideas to strengthen defined profit pensions within the private sectorrecommends six possible policy actions that Congress could take to strengthen private sector pension plans. These recommendations include:

– Reducing the Pension Benefit Guaranty Corporation (PBGC) per capita premium rate for occupational retirement plans.

– Reduction of the variable PBGC premium.

— Formal legal recognition of risk-sharing plans.

— Allowing greater flexibility in using surplus funding in defined profit plans.

– Allow tax-free worker contributions to personal sector pension schemes along the lines of state and native government pension schemes.

– Formal legal recognition that retirement advantages needs to be fungible for every individual and that transfers from defined contribution plans to pension plans (and vice versa) needs to be possible, in accordance with Revenue Ruling 2012-4.

While each of those policies may not represent a significant change by itself, taken together they provide a strategy to increase the supply of pension plans, particularly by addressing employers’ concerns about funding pension plans.

In view of strong markets and challenges on the labor market, the US corporate world can be taking a brand new have a look at pensions

Company pension plans are currently having fun with great popularity. The latest Milliman 100 Pension Funding Index reported a funded ratio of 103.4 percent as of April 30. While rising rates of interest pose a challenge for a lot of consumers, they’re helping to bolster funding for a lot of retirement plans. The strong position of corporate pension plans has revived discussions concerning the role of pension plans in total worker compensation.

Another vital point in these discussions is the advantages that pension funds offer employers in recruiting and retaining employees, particularly in today’s tight labor market. 90 percent of employees with a pension say that a pension profit makes them more more likely to stay of their job even when one other job opportunity arises. And greater than half (57 percent) of employees say they might quite select a job that provides a pension than a job that provides a 401(k) plan.

IBM
IBM
surprised many last 12 months with its decision to stop its 401(k) contributions and reinstate its cash-balance pension plan. Although IBM is currently alone in its decision to resume offering a pension, other private corporations may follow suit. A signal from Washington lawmakers in favor of accelerating pensions could encourage other corporations to act. Not only would this strengthen retirement savings for workers, however it is also financially helpful for those corporations.

Pensions are the economically efficient Ability to supply retirement income to employees. This efficiency advantages employees, who profit from the pooling of life expectancy and investment risk, in addition to skilled asset management. And this efficiency also helps corporations provide a certain level of retirement advantages at half the associated fee, which has a positive impact on company bottom lines. Congress has a crucial role to play in creating a positive policy environment that supports retirement plans. The recent interest in Congress in creating such an environment is encouraging.

So let’s leave it to dinosaur lovers to assume the wonders of long-extinct creatures, and keep our give attention to supporting something that’s all the time thriving today: the defined profit pension plan.