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A DB plan, taking professional advice, would never have been exposed like that.
But GE was late in freezing its DB plan and failed to adequately fund it.
Indiana and Oregon require employees to participate in both a DC and a DB plan, and eight states allow a choice between the two types.
Creating a DB plan in effect turns an employer into a kind of insurance company, having to monitor factors such as longevity and investment risk.
When Jack Welch stepped down as CEO in 2001, GE's defined benefit (DB) plan was sitting on a surplus of $14.6 billion.
Still, provided that contributions to the DC plan are made at the same rate as into the DB plan, that shift in the burden of risk may not be all bad from the employee's point of view.
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The employers that "sponsor" these defined-benefit (DB) plans face years of little growth or worse.
Since the recession began, no state has abandoned DB plans completely.
Individuals whose wages peak early also lose out under DB plans.Employees with DC plans do not face these risks.
Under DB plans, all the investment risk fell on the employer; in normal DC plans, it falls on the employee.
By 2000 most US public companies had closed off their DB plans and made substantial contributions to shore them up.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com