Defined benefit (DB) pensions remain a robust and favored source of retirement income, countering perceptions of decline. According to an Investment Company Institute report, DB pension plans support 25 million beneficiaries with assets totaling $11.8 trillion and annual benefit payments exceeding $600 billion. While private sector pension coverage has decreased since its peak, approximately 90% of state and local government employees are still covered by these plans. There is a renewed appreciation for DB pensions among workers due to their reliability and stability.
Congress has recently reexamined the role of pensions in retirement security, addressing concerns about dwindling private sector plans in a February hearing by the Senate HELP Committee. Testimony emphasized how pensions enable dignified retirements, stabilize workforces, and bolster the economy during economic downturns. In response to this hearing, the Senate HELP Committee has solicited feedback on policies to expand private sector pension availability. This legislative interest marks a shift towards supporting pensions alongside traditional focuses on 401(k) and defined contribution plans, as seen with recent legislation like the SECURE Act and SECURE 2.0.
The National Institute on Retirement Security proposed six policy recommendations to the HELP Committee, aiming to enhance private sector pension viability. Key measures include reducing Pension Benefit Guaranty Corporation (PBGC) premiums, both fixed and variable, to incentivize employer participation and improve retirement security. In conclusion, while DB pensions face challenges, they remain vital for retirement security. With supportive policies and renewed legislative interest, pensions can continue to provide stable and reliable income for retirees, ensuring broader access to financial well-being in retirement.
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