Benefit Compensation Essays Essay Example | Topics and Well Written Essays - 1250 words

Benefit Compensation Essays - Essay Example The supporters of defined benefit plans argue that DB retirement plans represent the only, which can offer real retirement safety. The supporters of defined contribution plans state that DC retirement plans still provide more safety due to the possibility of employees to trace the facilities on their accounts. During the last few years too many defined benefits plans were changed to defined contribution retirement plans. The main reasons of that are the following: Michael Sze in his work â€Å"Which is Better for the Participants - A Defined Benefit or A Defined Contribution Plan† provides the questionnaire that helps define employees’ preferences. He made an interesting conclusion that younger workers prefer defined contribution retirement plans, while older employees often choose defined benefits plans. The survey clearly indicates that the employees are more informed than what some pension experts believe them to be. The employees may not fully understand the technical details of the DB and DC plans, but they know essentially what they need and what types of arrangements would be best to provide for these needs. The challenge is for the pension experts and plan sponsors to establish plans that will cater to their needs (Sze). It is necessary to mention that converting defined benefits plans into defined contribution retirement plans represents a problem for companies. Some people do that not because of advantages the plan provides, but to have extra funds in the situation of economic crisis. Jeff Sanford calls it â€Å"a new pension crisis† and comments: Another problem, as some companies are starting to find out, is that plan conversions may set your company up for legal problems if employees retire and run out of money faster than they expected. As lawsuits already filed in the U.S. are making clear, employees are holding companies responsible