With all of the defined benefit plan terminations and freezes you read about, it is nice to hear about one company’s decision to go against the flow and reinstate its defined benefit plan. The reason: competition in the labor market. Read about it in this interesting article from Workforce Management: “Pension Defrosted: Aerospace Corp. Unfreezes Its Pension to Attract Skilled Workers.” Excerpt:
Employee retention was also a key issue. The defined-contribution plan that replaced the pension plan for new employees in January 1993 provided no incentive for workers to remain with the company. As a result, turnover among those employees was higher than acceptable before the retirement plan change, says Grant Aufderhaar, principal director of the sensor signals and electronics subdivision in the company’s Chantilly, Virginia, office. He says that the portable nature of the defined-contribution plan may have contributed to that. “The defined-benefit pension plan provides some golden handcuffs and an incentive for people to stay with the company,” he says.
(Long live the defined benefit plan! With boomers beginning to retire and leaving the workforce, perhaps defined benefit plans will make a comeback as employers seek to retain valued employees and to gain a competitive edge.)