Those surpluses protect the plan and current and future retirees against the certain coming of market corrections, recessions, and a downturn in the economy. In addition, the cost of the plan is not a dominant factor in the conversions. Two recent independent studies of employers that have converted traditional defined benefit plans to hybrid plan designs demonstrate that a majority expect their total retirement benefit costs to increase or to stay the same. Thus, this argument, too, is irrelevant. Indeed, if the arguments behind the Sanders-Gutknecht amendment were true, the tax qualification of many plans would be jeopardized and millions of American workers would suddenly be faced with substantial tax penalties.
Employers offer retirement and other benefits as a means to recruit and retain qualified workers.
If new rules and regulations make it difficult or impossible for employers to modify their plans in ways that they feel are necessary to remain competitive, they will take other steps that are not so encumbered. Some may turn to other benefits arrangements, which, while popular at the moment, may be less secure in the long run. Others may simply terminate their plans altogether. The demise of defined benefit plans is a clear example of how earlier warnings against impracticable rules were ignored to disastrous effect and of what not to do in the present circumstance. In 1998, about 42,000 remained.