Active 401(k) plans
102,703
Combined assets > $7.3 trillion
Retirement Plan Guide
401(k) vs. Defined Benefit Pension
The two main types of employer-sponsored retirement plans differ fundamentally in who bears investment risk and how benefits are calculated.
Defined benefit pensions
4,031
Covering 6M+ participants
By the Numbers (2024 DOL Form 5500 Data)
- 102,703 active 401(k) plans with combined assets exceeding $7.3 trillion
- 4,031 defined benefit pension plans covering 6+ million participants
- 401(k) plans now outnumber pensions by more than 20:1
How Each Plan Works
401(k) Plans (Defined Contribution)
In a 401(k), you and your employer contribute money to an individual account. The final benefit depends on contributions made and investment performance, you bear the investment risk.
- Employee contributes a portion of salary (up to $24,500 in 2026)
- Employer typically matches a percentage (e.g., 50% up to 6% of salary)
- You choose investments from a menu of funds
- Account balance = retirement income
Defined Benefit Pensions
Pensions promise a specific monthly benefit in retirement, typically calculated as a formula based on salary and years of service. The employer bears all investment risk.
- No employee contribution required in most plans
- Benefit formula: e.g., "2% × years of service × final salary"
- Employer funds and manages the investments
- Guaranteed income for life
Who Offers Pensions Today?
Traditional pensions are now mostly found in:
- Government jobs - federal, state, and local employees (though government plans don't file Form 5500)
- Union employers - many collectively bargained agreements still include defined benefit plans
- Large legacy corporations - automakers, airlines, utilities
Browse the largest defined benefit pension plans to see which private employers still maintain traditional pensions.
Which Is Better?
There's no universal answer, but key considerations:
- Job tenure - pensions reward long service; 401(k)s are portable
- Risk tolerance - pensions eliminate investment risk; 401(k)s require investment decisions
- Employer financial health - a pension from a distressed company carries default risk
Related Resources
Worked example: two retirement paths compared
Consider two hypothetical participants, both retiring at age 65 with 35 years of service. Participant A is in a defined-contribution 401(k) with $850,000 accumulated and a 4% safe-withdrawal rate, yielding $34,000/year in retirement income. Participant B is in a final-average-pay defined-benefit pension paying 1.5% × years × final average salary; at a $75,000 final salary that produces $39,375/year. On the surface the pension wins by $5,375/year, but adjust for two factors: the 401(k) balance is transferable to heirs while most pensions pay nothing after the participant's death (or a 50% survivor annuity if elected, which typically reduces the lifetime payout by 8%-12%). The right comparison weighs guaranteed lifetime income against bequest flexibility, and there is no universal answer, only a trade-off shaped by family circumstances and longevity expectations.
Plan structure comparison matrix
| Dimension | 401(k) (DC) | Pension (DB) |
|---|---|---|
| Investment risk borne by | Participant | Employer / plan sponsor |
| Income predictability | Variable (market-linked) | Fixed (formula-driven) |
| Portability between employers | High (rollover to IRA) | Low (vesting + plan continuity) |
| Bequest to heirs | Full balance | Usually $0 or partial survivor annuity |
| Federal insurance | None | PBGC up to statutory limits |
| Typical vesting schedule | 3 to 6 years cliff or graded | 5 to 7 years cliff |
Defined-benefit and defined-contribution plans are not interchangeable instruments, they distribute risk, predictability, and inheritance flexibility in fundamentally different ways.
Reading both plan disclosures side by side
Every participant should request and read two documents: the Summary Plan Description (SPD) for any employer-sponsored plan and the most recent Form 5500 filing for the plan, both required under ERISA Section 104. The SPD describes eligibility, vesting, contribution match, distribution options, and beneficiary rules. The Form 5500 discloses plan assets, participant counts, expenses, and the auditor's opinion. Reading both gives a complete picture without relying on summarized HR materials. Pension SPDs additionally show the benefit accrual formula and any early-retirement reduction factors, a typical 5%/year reduction for retiring before age 65 means a participant who retires at 62 receives roughly 85% of the benefit they would have received at 65. For 401(k) plans, the Form 5500 Schedule H is where expense ratios live; a plan disclosing total expenses above 1.5% of assets is meaningfully above industry medians and a reasonable trigger for conversation with the plan committee.