Pension Schemes Provide the Long-Term Security of Private-Sector Workers

COMMERCE

There are two distinct types of pensions plans that private companies can provide for their employees: defined contribution (DC) plans, in which workers save money in individual accounts that can be tapped in retirement, and defined benefit (DB) plans, in which workers receive a set monthly benefit payment beginning upon retirement. For their workers' retirement security, some companies provide both defined benefit and defined contribution pension plans, whereas the vast majority offer either one or the other. Even though most defined contribution plans are sponsored by a single company, the SECURE Act (enacted as Division O of the Further Consolidated Appropriations Act of 2020 includes measures intended to promote the sponsoring of DC plans by multiple employers. Some policy concerns with DC plans are distinct from those with DB plans. Government-sponsored defined contribution (DC) plans on the federal, state, or municipal levels are not included in this study. Despite certain shared features, public sector defined contribution plans are not subject to the same legal requirements as their private sector counterparts.

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