When the angry mob comes knocking…

Firms need to educate employees about making important financial decisions
By Asaf Shad
|CHRR, Guide to Pensions & Benefits|Last Updated: 06/17/2003

As more workplaces make the move from defined benefit pension plans to defined contribution plans, the ability of employees to make sound financial decisions and employer responsibility for not educating staff is coming into question.

Workplace pension plans are of increasing concern to both employers and employees. Over the past year the value of many pension plan assets have dropped dramatically as stock markets plunged in the wake of corporate scandals.

This decline in the value of an employee’s pension fund raises another issue: Is the employer liable for any of the downfall or is the employee left alone to shoulder the entire loss? In the case of a defined benefit plan, the employer is liable for the shortfall. Because of this, many employers offer new employees a defined contribution pension plan. Some employers have even converted existing defined benefit plans into defined contribution plans that are, in most cases, cheaper and more accounting friendly.