Traditional pension plans are pretty rare. But here’s who still has them and how they work

CNN ^ | Sep 7, 2023 | Jeanne Sahadi

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The phrase “pension benefits” may come up a lot in the next several days as negotiations between the United Auto Workers union and the Big Three automakers go down to the wire to avert a strike. But for most private-sector US workers, pensions disappeared long ago.

In a traditional pension, employers contribute, invest and manage retirement funds for their workers, who then receive guaranteed monthly checks for life after they retire. But over the past several decades, employers have either closed or frozen their pensions and turned instead to retirement savings vehicles like the 401(k), which put much more of the onus on workers to save, invest and manage their own money for retirement.

“We’ve shifted from a more paternalistic system to a do-it-yourself savings plan,” said Karen Friedman, executive director of the Pension Rights Center.

That’s not to say traditional pensions — also known as defined benefit (DB) plans — are completely dead, at least not when you look at the broad landscape of all US workers. But access to these benefits has dropped steeply and they are not likely to make a comeback.

Who has a pension in 2023

The workers most likely to still have a DB plan are unionized workers in both the public sector (think federal, state and local government workers and teachers) and the private sector (e.g., autoworkers), as well as active-duty military members with at least 20 years of service.

[Wuli]

There is a third kind of pension plan ignored by the article. That third kind is a traditional defined contribution plan, not a 401k, and much older than the 401k.

The traditional older defined contribution plan is a managed pension plan from contributions to retirement, but the pension benefit is directly related to only two things (primarily) - the value of the accumlations (contributions and earnings) in the account, and the expected lifetime of the person. Simple math from those two things alone determine the benefit (essemtiallY). But unlike the 401k, it is an account managed by the pension fund, not the employer (per se) and not an account that can be withdrawn entirely and moved somewhere else by the individual.