The Benefits of Choosing a Job With a Pension Plan Vs. 401(k) Contributions

Pensions provide a fixed monthly payment based on concrete factors, such as your years of service or salary size in the last few years before retirement. Shutterstock

Data from the Bureau of Labor Statistics indicates that only 15 percent of private industry employees have access to a pension, also known as a defined benefit plan. Employers began moving away from these plans in the late 1970s when the 1978 Revenue Act began allowing employees greater control over their retirement savings by using pre-tax dollars for 401(k) contributions. Some employers saw this as a potential opportunity to reduce risk and long-term financial obligations, ultimately leading to a better bottom line. However, many employers are reconsidering that decision amid data showing how cost-effective pension plans are compared to 401(k) plans.

If you’re in the market for a new job, this could be good news for you and the company you’ll work for.

The Case of IBM’s Big Decision and the Revival of Pension Plans

Recently, multinational tech giant IBM has decided to halt 401(k) matching and bring back its defined benefit plan for full-time employees. Under the “new” pension plan, the company will set aside 5 percent of an employee’s salary for the pension fund. This is the money the company would have used to match employees’ 401(k) contributions.