The Impact of Decreasing Defined Benefit Plans on Employee Turnover

The gradual adoption of defined contribution retirement plans has been a significant change in the occupational pension system in the United States over the last few decades. By transitioning from defined benefit plans to defined contribution plans, companies are shifting the financial risk associated with saving for retirement onto the employee. Though the shift of this financial risk is the primary concern for many, there are other side effects that this transition may bring about. The principal side effect observed in this research is the potential of defined contribution plans to dis-incentivize employee loyalty and contribute to increased employee turnover in a company. This is explored through univariate analysis of access to and participation in defined benefit and defined contribution plans across various categories including worker characteristics, establishment characteristics, and geographic areas. Analysis of quit rates across the categories is conducted as well in an attempt to understand the shifts in access, participation and take-up rates in defined benefit and defined contribution plans offered by employers, returns on the S&P500 Index are analyzed. The data analysis produced three key findings: 1) year over year market returns have little impact on access, participation, and take-up rates; 2) take-up rates of all retirement benefits decreased from 2008 until 2018 among all workers while quits levels increased among all workers; and 3) the exact impact of benefit plans on employee turnover is still unclear, even when surveying the data in specific industries and geographic regions.