No. of Recommendations: 0
It seems to me the differences here are pretty obvious. With a defined benefit plan your employer takes the risk. If interest rates rise, his plans are overfunded and he can bring the excess funds to the bottom line as profits. If interest rates go down, his plans are under funded, so he has to cough up extra bucks.

Employers do not like this responsibility. So what do they do? They point out that they must invest this money in conservative bonds. They wait until stocks do well and then tell everyone how much better off they would be if they had their own plan--like a 401K or a defined contribution plan--so they can benefit from those marvelous stock gains. Then of course many wind up hiring financial advisers to help them work out the complex details. Everybody makes money, but the individual gets screwed.

This is not unlike current discussion on investing social security funds in stocks. It sounds good, but we all know the financial services community is going to be the main beneficiary; the individual may lose his meager benefits. At least these funds should be professionally managed (i.e., mutual funds), and I would think Congress should impose some common sense limits on approved funds to make sure they do not put all funds into the internet bubble or the likes of Enron. Stocks yes, but lots of blue chips with only a portion in risky "growth" stuff.
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