Congressional Committee Seeks Information on Promoting Defined Benefit Pension Plans

On February 28, 2024, Chairperson Bernard Sanders (I-VT) and the majority staff of the Senate Health, Education, Labor, and Pensions (HELP) Committee released its report “A Secure Retirement for All” in coordination with that day’s full committee hearing on the potential for the expansion of defined benefit pension plans.

The report takes a dim view of the state of retirement in America, highlighting a 2019 report by the US Government Accountability Office showing nearly half of Americans 55 and older did not have any retirement savings, as well as a 2021 academic research study that found nearly half of all Americans – regardless of age – are at risk of financially insecure retirements.

The steep decline in defined benefit pension plan participation is the primary theme of the report, which shows that while almost 30% of American workers had a defined benefit plan in 1975, only 13.5% do now. Although the contrast between defined benefit plan participation and defined contribution plan participation over the past 50 years is well-known, the numbers are still striking: More than 27.2 million workers participated in defined benefit plans in 1975 versus just 11.2 million workers participating in defined contribution plans. But, in 2019, over 85.5 million workers participated in defined contribution plans versus just over 12.6 million workers who participated in defined benefit plans.

For the committee’s consideration, the report concludes with two possible means of addressing the decline in defined benefit plans:

First, the report recommends expanding Social Security through various means such as removing the earnings cap ($168,600 a year in 2024) on the Social Security portion of the federal payroll, increasing benefit amounts across the board, and using the Consumer Price Index for the Elderly to determine annual cost-of-living-adjustments to benefit payments.

Second, the report recommends establishing a federally facilitated pension program modeled on similar programs in states such as California, Illinois, Oregon, Connecticut, Maryland, and Colorado, which would require businesses that have operated for two years or more to offer a defined benefit pension plan or defined contribution retirement plan meeting minimum requirements to its workforce, or, alternatively, offer its employees access to a state or the federally facilitated plan.

Speaking on behalf of the committee’s minority membership at the hearing, ranking member Sen. Bill Cassidy (R-LA) broadly opposed these recommendations, observing that the relative popularity of defined contribution plans compared to defined benefit plans was not necessarily a negative outcome overall, and that more time should be given for the provisions of SECURE Act 2.0 to take effect before implementing major changes such as those proposed by the majority staff in the report.

While the HELP report provides useful information regarding the present role of defined benefit plan participation in the retirement space, its policy recommendations do not have the force of law, nor are they likely to be taken up for consideration by the full Senate this year. They do, however, provide valuable insight as to the current retirement policy priorities of HELP’s Democratic majority membership, which are often leading indicators of future retirement policy initiatives.

Report: A Secure Retirement for All »