Corporate America's transition to defined contribution benefit plans

An increasing percentage of companies in the United States are changing over from defined benefit plans, better known historically as the 'traditional' type pension plan, to defined contribution type pension plans. The wealth accumulated in defined contribution plans depends on the participant's contribution behavior, and on financial market returns, compared to defined benefit plans funded by a participant's employer and sensitive to a participant's labor market experience and plan parameters.;This paper analyzes pension plan changeover in the environment of Corporate America today. Economic conditions such as a decrease in unionized industries, an increase in service industries, and globalization have encouraged many industries to change from defined to contribution type plans. Contribution plans enable employers to remove financial barriers such as lifetime pension payouts, and are a valuable tool for providing employees with the ability to manage a financially secure future for their retirement years.