The employer pension plan has been a part of the employee benefits landscape for nearly 140 years. Yet the reality is that after a tremendous rise in the decades after World War II, the availability of the defined benefit plan has been in decline for over 30 years, as the defined contribution plan has risen to take its place.
Yet unlike a pension plan that was paid in addition to an employee’s salary, the defined contribution plan often amounts to little more than an employee saving his/her own money in the first place, perhaps plus a moderate match that is losing its purpose as a behavior incentive when more and more plans include automatic enrollment and automatic escalation of contributions in future years.
All of which raises the fundamental question: if employers simply paid a greater salary (with a raise equivalent to what the match would have been) and let employees choose whether to save, is there really any need for a 401(k) plan at all? And with the MyRA coming soon – which once in place, could be easily modified in the future to include automatic enrollment, and higher contribution limits similar to what 401(k)s allow today – could we be witnessing the beginning of the end of the 401(k) plan altogether?