What Were They Thinking?

C H A P T E R 8

Let Workers Work

The Downsides of Having People Manage Their Own Benefits

FACING GROWING COMPETITION and financial pressure, many companies have responded by cutting employee benefits to maintain their profits. A 2005 survey by Deloitte found that 90 percent of the responding companies planned to rein in costs during 2006 by changing their active employees’ health plans.¹ Companies are also cutting back pension benefits, either freezing or canceling defined benefit plans—those programs that pay retired employees a fixed sum depending on their final wage and years of service—and either eliminating retirement programs completely or substituting defined contribution plans where employees manage their own accounts and assume more ...