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Retirement Savings Policy by Michael P. Barry

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Chapter 15 The DC Adequacy Challenge

One way to think about defined benefit plans is as a system that starts with an adequate employer-provided retirement benefit (or at least the experts’ definition of one), builds the plan design around that concept and leaves to the sponsor the challenge of financing that benefit in the face of volatile and unpredictable stock and interest rate markets.

The problems the DB system presents are, for employees, its one-size-fits-all benefits design and bias towards older participants, and for sponsors, its lack of transparency and, over a period of declining interest rates, its ever-increasing cost. But the one problem it does solve, for a full career employee at least, is adequacy. Generally, participants in ...

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