In a changing landscape of retirement benefits, employers are reevaluating their total rewards packages and considering the advantages of defined benefit plans. IBM's recent decision to reopen its cash balance plan and end its 401(k) contributions has sparked discussions about the potential ripple effect it may have on retirement benefits.
Brian McDonnell of Cambridge Associates highlights the benefits of defined benefit plans, including their affordability and ability to provide retirement security. Cash balance plans, in particular, offer participants the advantage of maintaining ownership of their balance after a vesting period, even if they leave the company. This feature provides employees with a sense of security and ownership over their retirement savings [38f6260a].
IBM's decision to resurrect its cash balance plan reflects the company's overfunded pension plan and the need to explore new retirement benefit options. By reopening the cash balance plan and ending 401(k) contributions, IBM is taking a creative approach to hedge liabilities and provide growth in retirement benefits. This move may prompt other plan sponsors to reevaluate their defined benefit plans and consider similar strategies [38f6260a].
The article emphasizes the importance of educating plan sponsors about the available tools and options for pension plans in today's market. As employers reassess their retirement benefit offerings, it is crucial for them to understand the advantages and potential impact of cash balance plans and other defined benefit options. By staying informed and exploring creative strategies, plan sponsors can provide retirement security and growth opportunities for their employees [38f6260a].