“Employers shouldn’t put all of their money into private equity because that was delivering huge returns at one point, but then it just collapsed,” Mohindra says. “At the same time, you don’t want to put everything into bond funds, which would basically earn very meager returns. That wouldn’t give them what they need.”According to a recent study by the Employee Benefit Research Institution, defined benefit plans have been on a steady decline since 1979 compared to its counterpart, defined contribution plans. While this decline may be true, Mohindra wouldn’t be surprised to see defined benefit plans grow in popularity because they pose less individual risk.
“I think the pendulum has probably swung too far in the direction of defined contributions, so the individual is at risk now,” Mohindra says. “With defined contribution plans, the employer has devolved to risk to the employee and only bares administrative costs, but companies can draw the top talent they need for the long term by offering them a better deal regarding their retirement arrangement.”
There are alternatives to the traditional defined benefit plan that many employers including small employers can implement to attract talent.
Please comment or call to discuss how this might affect your organization.
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