Plan Advisor, October 31, 2008

Rebecca Moore freezing a defined benefit pension plan might not reduce costs.

A NIRS research brief says freezing the DB plan in favor of a defined contribution plan could involve increased costs, reduced benefits, or a combination of both. “Look Before You Leap: The Unintended Consequences of Pension Freezes,” specifically says that freezing a DB plan and moving to an individual defined contribution (DC) plan can:

• increase costs to employers and/or taxpayers due to higher costs of operating two plans, erosion of economic efficiencies, and front-loaded contribution requirements;

• further exacerbate retirement insecurity concerns, which in turn can hamper worker recruitment and retention effort, result in higher turnover rates, create labor shortages, increase training costs, and lower productivity levels.

Read the full story here .