Why would anybody start a defined benefit plan in this era? They're costly, the regulatory burden can make an elephant's knees buckle, shareholders hate the hit to earnings from unexpected contributions, and employees switch jobs every three years and don't appreciate the plans.
While the federal government ostensibly wants Americans to have adequate resources for their retirement, "one of the ironies is that the government has made it painfully difficult to open a defined benefit plan," said Robert D. Arnott, chairman of Research Affiliates LLC, Pasadena, Calif., and editor of the Financial Analysts Journal.
Yet, Research Affiliates did just that last month, starting a pension plan for its 18 employees. "We launched it because we thought it was the right thing to do," Mr. Arnott said. "We don't have ridiculous assumptions to meet our earnings target."
Unfortunately, many of Mr. Arnott's clients aren't so lucky.