With the societal shift from reliance on DB plans to DC plans, there could be a number of unforeseen and unintended consequences. The drop in DB coverage from 1985 to 2011 has been precipitous, falling from 112,000 companies to just 25,500. Even more telling, 35% of baby boomers have access to DB plans, while only 16% of Gen X and Y workers have the same.
An analysis by MassMutual of data from a leading group health insurance carrier and various federal government agencies uncovered a more than 1,500% annual cost increase for employees 60 or older vis-à-vis employees 30 or younger. The calculation includes health care premiums ($9,000 vs. $2,500, respectively, for both groups) and disability insurance premiums ($532 vs. $32).
In addition, companies where people cannot afford to retire will have fewer opportunities for promotion for younger people whose salary is lower; many may decide to move on to other companies that have more opportunities.
CFOs and CEOs that do not invest today in their DC plan will surely pay later.
