> A pension is just an annuity, the corporate equivalent of employer-provided health insurance vs open market health insurance. Annuities, like life insurance, are considered some of the most reliable investments possible, precisely because of relatively strict, century-old reform legislation.
Exactly, but DB pension funds are not regulated by insurance commissioners the way insurance companies that sell annuities are. I wonder why every taxpayer funded pension and private company pension before PPA 2006 would value an annuity at a lower price than an insurance company would…
Since they are the same as annuity, then the employer should just go out and buy people an annuity. Or better yet, give the employer cash and let the employee decide if they want to buy an annuity or not. Insurance companies make single digit profit margins, it is not like having every employer roll their own insurance company was saving anyone any money.
> the corporate equivalent of employer-provided health insurance vs open market health insurance.
It is not quite equivalent since the company is not the one deciding how to do the actuarial calculations, at least not in a way that can be tilted like having their own people on a pension board of trustees would. Most of the health insurance aspects are taken care of by managed care organizations (aka health insurance companies). It would be equivalent if employers offering DB pensions were hiring insurance companies to calculate the cost of their annuities.
But they never would, because annuities are simply very expensive. At the end of the day, compensation for most people in the US was falling or stagnant in real terms for the past few decades (and people were living longer), so offering them properly priced annuities would have made any business untenable, hence businesses jettisoning them in favor of DC plans.