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Politics : Ask Michael Burke
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To: Freedom Fighter who wrote (58506)5/4/1999 4:15:00 PM
From: IceShark  Read Replies (2) of 132070
 
Wayne, the shift from defined benefit plans to defined contribution plans and then 401k plans really began in earnest back in the early 80's as people started to notice Honeywell's new 401k plan, which I'm pretty certain was the first ever. And the reason for the shift was two fold: 1) another way to bump up nontaxable compensation for higher level employees, 2) a cheaper cost retirement substitute for employees. In most cases #1 was initially the real reason. But due to discrimination rules, employer matches were tossed in to lure more employees to participate and meet the discrimination rules.

As time went on #2 became the primary reason. Not because of asset inflation reasons - it was just cheaper.

As for current motivations and asset bubbles making defined benefit plans risky to the companies, well that may or may not be, depending on the plan. Some of these plans are so over funded you wouldn't believe it. The 401k die was already cast before this bubble happened so your theory is moot from a practical standpoint.

An interesting point you may wish to run with is that in the mid 90's the Fed Pension Regulator boyz and girlz were worried sh!tless about under funding of defined benefit plans and the possible cost to the Feds if plans went bust. Another reason the gov't would just as soon see equity prices remain high. -g-

Bears are DOOMED.

Regards, Ice
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