Macroeconomic Aspects of Private Retirement Programs

The decline in importance of private defined benefit plans in relation to defined contribution plans in the United States is a major issue of interest to pension actuaries. This decline has been attributed to numerous factors: costs of government regulation, societal and cultural changes, changed employer attitudes, and employees’ lack of understanding of defined benefit plans. It has also caused some observers to proclaim the end of private defined benefit plans. This paper analyzes possible macroeconomic factors contributing to the crisis of defined benefit plans and proposes an alternative hypothesis for the cause of the crisis: the decline of the relative attractiveness of defined benefit plans in relation to defined contribution plans when these are viewed as investments, that is, as securities in capital markets.