Changes in Firm Pension Policy: Trends Away from Traditional Defined Benefit Plans

In light of the recent concerns regarding the solvency of Social Security’s Old-Age, Survivors and Disability Insurance (OASDI),
private pensions may play an increasingly important role in retirement welfare of US retirees. However, the private pension
landscape has evolved in ways that may result in lower private pension wealth for retirees. One recent such phenomenon involves
the conversion of traditional defined benefit pension plans to cash balance plans, which results in lower pension benefits
for many workers. In this study, I investigated how characteristics of the firm’s workforce influenced whether the firm converted
their traditional pension plan to a cash balance plan and how these characteristics related to the firm’s pension plan policy
more generally. Using the Longitudinal Employer-Household Data and pension plan data from the Department of Labor/Internal
Revenue Service and the Pension Benefit Guaranty Corporation, I found little evidence of workforce age distribution effects
on the likelihood of DB plan conversion to a cash balance plan in the 1990s. More generally, I consistently found positive
associations between firms with older and more female workforces and defined contribution plans during the same time.