Sorry, but not a single one of those are a cost to the employer - they merely represent a mandated family of plans on a continuum of risk scales. The cost to the employer is simply the amount of money they decide to spend on retirement funds for their workers. A dollar’s worth of bonds has the same value as a dollar’s worth of stocks. Pretending you have a defined benefits plan like Studebaker did 55 years ago and then leave the workers with a pittance when you go broke is just a mirage - not really a plan - little different from buying a lottery tick and calling it your pension plan. Pension plans just shouldn’t be subject to that kind of risk and still be called a pension.
Bolstering Call to Expand Social Security, New Reporting Reveals How Corporations Are Offloading Pensions
(I just realized I didn’t state my point in a very understandable way in my last post by focusing only on risk – here’s a couple sentences I wish I had included.)
For example, let’s look at the ERISA mandate to require a maximum 5 years to vesting. As you mentioned some employers previously had a 10-year vesting period. You claim this rule costs the employer more to provide a pension. I’m saying that the rule is cost neutral – but just defines the distribution of which employees receive the pension dollars (moving pension dollars from employees who work more than 10 years for a company to employees who work 5-10 years).
If you have an ERISA-qualified plan, you are legally required to fund it (and purchase insurance on the plan). To some extent you can game the system with your actuarial assumptions, but realize, for example, that your example (Studebaker) went bankrupt before ERISA existed. With a DB plan, the company assumes the risk of investment performance (i.e., it has to make up any performance shortfalls - no “choice” in terms of how much it funds)
Also, the difference between 5 year and 10 year vesting is more than “moving pension dollars” it also reflects whether the company is going to reward short-service versus long-service employees, and it significantly increases administrative costs (which benefit no one but consultants and lawyers) by having to track larger numbers of non-current-employees.
The bottom line remains - ERISA increased the cost of providing a pension. Many companies have decided that that cost is not worth incurring. Net result - fewer pensions.
That’s why I chose it - to point out that pre-ERISA employers did not truly offer a guaranteed benefits pension.
And again there is no increase in administrative costs to the company due to tracking more people on the plan as you suggest - since such costs come out of the plan.
ERISA forced employees to offer a true defined benefits program that meets minimum standards if they were going to claim to offer one. I completely disagree with any assertion that pretends there are additional direct costs to employers who offer a guaranteed defined benefits program.
However, you make a valid point that in doing so, it obviously reduced employer choices - and that is a “cost” that many employers may not want to live with.
(no need to respond to this - I think I understand your position pretty well on the topic)
Re Cruz, that’s a gargantuan understatement. He’s an example of that persistently surprising phenomena of someone of reasonably good pedigree turning out to still be a sorry character.