Defined benefit plans vs. defined contribution plans.

• Author: Wall, James
• Position: SpeakOut!; accounting - Brief Article

Regarding the article "Are Defined Benefit Plans Still a Good Option" (California CPA, June 2004), the authors did a very good job of attempting to show that there are some, albeit minor, benefits to DB plans.

What they did not note:

1. The remaining DB plans are primarily operated by older companies that have yet to figure out how to exit the plans, or by unions and government who do not care about the complexities of the plan or cost of administration. What is surprising is that there are any DB for-profit sector plans left.

2. A significant component of what drove DB plans down in use is the volume and cost of compliance with ERISA/IRS regulations compared with defined contribution plans. At one point, actuaries such as the authors were the highest paid profession in the U.S., beating out professional athletes. Compare the financial statement disclosure for a DB plan to a DC plan for a good indication of difference in complexity. Better to kill the DB plan than kill the company.

3. Most important, a DC...