Over the past four decades, the U.S. retirement system has largely shifted from defined benefit pension (DB) plans to defined contribution (DC) plans—mainly 401(k) plans—and individual retirement accounts (IRAs). A key factor driving this change is employers’ desire to avoid the risks associated with providing guaranteed pension benefits. This guarantee—a defining feature of DB plans—can entail large and unpredictable changes in funding obligations, which can wreak havoc on corporate balance sheets and budgets. But the flight from DB plans to 401(k)s and IRAs did not make financial risks disappear; instead, it transferred the risks to individual workers, many of whom are ill-equipped to handle the resulting contingencies.
USA. Collective defined contribution plans (J. Mark Iwry, David C. John, Christopher Pulliam, and William G. Gale, Brookings)
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