2007 Employee Pensions: Policies, Problems, and Possibilities

Abstract

The U.S. stands apart from developed market economies in relying heavily on individual employers to achieve the common goal of securing retirement income for American workers. Employer plans include traditional pensions (defined benefit [DB] plans) and 401(k)-type plans (defined contribution [DC] plans).1To induce employers to provide a pension plan or a retirement savings vehicle, the U.S. government grants tax-favored treatment to all retirement accounts’ contributions and earnings. Money is taxed as income only at withdrawal. In 2006, the federal government’s tax break, referred to as tax expenditures, was worth more than $113 billion.