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July 31, 2014 at 08:13 AM
Defined benefit plans are helping pump billions of dollars more into the economy than the monthly pension checks collected by retirees.
So says a new study from the National Institute on Retirement Security, which calculated that DB plans supported about $943 billion in total economic output in 2012, the most recent year for which data was available.
The study also asserted that spending by pensioners supported 6.2 million jobs in the U.S., to the tune of some $306.9 billion.
The Washington, D.C.-based institute bills itself as a nonpartisan nonprofit, though its stance on pension plans is clearly out of step with many business interests and conservative groups.
Employers have been killing off defined pension plans for years now. Nearly 60 percent of companies surveyed last year said they have either frozen accruals for all participants or closed their defined benefit plans to new entrants.
In a webinar today, Diane Oakley, executive director of the institute, and Nari Rhee, manager of research at NIRS and the author of the study, Rhee pointed out that those 6.2 million jobs “exceed the number of jobs in the entire private construction industry, 5.6 million jobs in 2012.”
In the study, Rhee noted that, “in 2012 the national unemployment rate was 8.1%. The entire civilian labor force in the country consisted of 142.4 million potential workers, of whom 12.5 million were unemployed. In light of these numbers, the fact that DB pension expenditures supported 6.2 million jobs is significant, as it represents a full 4.4 percentage points in the national labor force.”
Another big finding in the study was that DB plans are more economically efficient than defined contribution plans, with 63.2 percent of benefits coming from investment earnings, not from employer or employee contributions. In addition, the institute’s research showed that pensions can provide the same level of retirement benefits at approximately half what a DC plan costs.
