A Mini (but Risky) Revival for Pensions
More firms are bringing back traditional retirement plans to attract key workers. But will this staple of 20th-century benefits become too pricey for 21st-century companies?
Until the 1980s, pensions were a hallmark of American industry, offering long-tenured employees a retirement check for life. Corporate America has spent the last forty years trying to shed pension plans.
But in the race to secure and keep employees with key skills in the AI era, some firms are revisiting the concept of pensions. Some legacy manufacturing and technology firms are restarting pension plans that have been dormant for decades, while other, smaller firms are launching programs for the first time. “Organizations are exploring whether retirement benefits can be used more strategically,” says Tom McMullen, leader of Korn Ferry’s Total Rewards expertise group.
Less than 10% of private-sector workers participated in pensions in 2024, down from about 30% in 1988, according to the nonprofit Employee Benefit Research Institute. Still, about 26,000 employers offer pensions now, up from 23,000 in 2020. No one expects to return to the heyday of pensions, McMullen says, but select organizations are at least considering them as a way to improve retirement security and retention.
High costs drove many organizations to end their pension programs and replace them with defined contribution programs such as 401(k)s. A pension plan put the organization on the hook for any shortfalls in the benefits it promised an employee. This was a massive headache in the 1990s and early 2000s, as some pension plans saw massive shortfalls and few prospects for solving them.
However, thanks to the run-ups in stocks and other investments over the past two decades, many of these once-underfunded pension plans now have huge financial surpluses. Today, the top 100 US corporate pensions have enough assets to cover 112% of their liabilities, up from 77% in 2012, according to pension-consulting firm Milliman. “Companies have been able to cover their retirement obligations and cut down on the annual cash flow they would normally spend matching 401(k) plans,” says Steve Kapper, a Korn Ferry associate client partner who heads the firm’s National Health and Welfare Benefits practice.
There’s also widespread anxiety among many employees about 401(k) and similar plans. Many don’t like managing their own investments or navigating plans that are often opaque. Also, major stock-market downturns have hammered workers twice over the last 25 years, crushing their retirement nest eggs (and depending on how old they were, giving them little time to recover). For some, a steady check in retirement could be tempting.
Legacy firms could also be tempted if they have frozen but overfunded pensions sitting on significant amounts of cash. Organizations facing chronic retention challenges in hard-to-replace technical roles might look at pensions as well. Finally, firms whose rivals are offering 401(k)s might want to use a pension as a benefit differentiator.
Experts warn that pensions aren’t perfect. The plans return investment risk to the employer, and there’s no guarantee that stocks will perform as well over the next 20 years as they have over the last twenty. The biggest question is whether a defined pension would be an effective talent retainer. Eighty-two percent of US workers say compensation is important factors for staying in their jobs, making it the top reason listed in Korn Ferry’s new Workforce 2026 survey. But it doesn’t stand out significantly above other reasons (for instance, 82% cited job security, and 79% cited feeling treated fairly compared to others).
Many younger workers also expect to move around during their careers. It remains to be seen whether a Gen-Z employee only a few years into their career will be motivated by the prospect of an annual check that might be 40 years away. For his part, McMullen observes that pension benefits are often poorly understood by employees, and therefore may be undervalued compared to other forms of compensation, such as pay increases, bonuses, stock awards or, ironically, increased 401(k) contributions.
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