The Declining Role of Private Defined Benefit Pension Plans: Who is Affected, and How

This chapter analyzes the impact of future freezes among corporate defined benefit (DB) pension plans. We simulate the impact on expected future pension wealth by assuming all existing private DB plans immediately freeze accruals for new employees. While this indicates the potential reduction in retirement wealth attributable to such plans, it does not recognize that sponsors freezing accruals may increase employer contributions to existing defined contribution (DC) plans or establish new DC plans. Using an empirical distribution of enhanced contributions to DC plans from sponsors freezing their DB plans, we simulate the nominal annuity that could be purchased at retirement age from these enhanced contributions. We then back out the net pension loss experienced by employees in the future.