The Ethics of the Pension Switch: The Effects of the Change from Defined Benefit to Defined Contribution Pension Plans

Abstract

This study focused on the effects of the trending switch from defined benefit to defined contribution pension plans. Specifically, I examined how the pension switch affects employers and employees and how the actions of employers making the pension switch measure up against pre-existing ethical theories. Based on my research of current academic articles and existing theories, I developed three propositions relating to pension switch. In the paper, I describe positive and negative aspects of both types of pensions and explain how the switch from DC to DB negatively affects both employers and employees. In addition, I describe how workforce succession can be disrupted as a result of the pension switch and how it may decrease employee motivation, using motivational theories as support. All three propositions are supported with academic research and pre-existing theories. Implications for companies with pension plans are discussed.