The defined benefit is dying. Barack Obama is struggling to keep it alive, but it’s apparent that it’s something that even as bounteously rich a society as ours can’t afford.
Yes, I know that “defined benefit” is not a common household phrase. But most people know what a defined-benefit pension is: It’s when your employer promises to pay you a certain amount of money, pegged to your salary or according to some other formula, when you retire.
Some 30 years ago, most big employers had defined benefit pension plans. Some private-sector employees still have them, and many government employees do.
But a little-known provision of the 1978 tax law, section 401(k), authorized companies to offer defined contribution pensions. Instead of promising to pay workers specific amounts years later when they retire, companies would put certain amounts in an employee’s 401(k) account.
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