Given the trend away from defined-benefit pension plans and the resentment by some people who don't have defined-benefit plans to those who do, I wonder if it would be possible to create a mechanism for anyone to join any existing pension plan.
Outside members would pay in however much they wanted to (and perhaps could use the contributions from their defined-contribution plans), and get returns commensurate with those contributions on the same scale as employee members. They'd be charged a management fee for this (akin to mutual funds), which would cover the cost of administering their membership plus a small profit. The employer would not pay anything towards the outside members, of course, they'd just be along for the ride.
Here's an example of how it would work, using numbers that make the math easy and don't reflect the ratios of actual pension plans:
An employee of Acme Inc. who earns $50,000 a year contributes $5,000 a year to the pension plan and the employer also contributes $5,000 a year to the pension plan, for a total of $10,000 in contributions a year. The employee then gets a pension of $1,000 a year for each year of service when they turn 65. So if they have 35 years of service, they get a pension of $35,000 a year.
If an outsider joins the Acme Inc. pension plan and contributes $10,000 a year for 35 years (plus the management fee), they'll also get a pension of $35,000 a year when they turn 65. If they choose to contribute only the $5,000 that the employee would be paying in, they'd get a pension of $17,500. If they choose to contribute $20,000, they'd get a pension of $70,000.
Possible variations: employees can also choose to pay more in and get a bigger benefit. So if the employee in the first example chooses to pay in $10,000 instead of $5,000, the employer would still pay in the same $5,000 for a total contribution of $15,000, and, after 35 years, a pension of $52,500.
This would be advantageous for everyone who doesn't have a defined benefit pension plan, because they could buy into a professionally-managed pension plan instead of having to figure out how to manage their retirement planning themselves.
It has the potential to be slightly advantageous for the employees, because they have more money being paid into their pension plan, plus they have outsiders who are now invested in not cutting back their pension plan. If they're public sector, they also have the advantage of less resentment from the public, because anyone can just join in.
It has the potential to be slightly advantageous for the employer, because they would be making a small additional profit from the management fees. In addition, people would be more likely to seek out pension stability during difficult economic times, and work tends to slow down during difficult economic times, so the employer would get this extra income (and a bit of extra work processing applications for its employees) when things slow down. The employer would also be seen to be providing a valuable public service and could probably swing some tax writeoffs from their pension management expenditures (if there isn't already some provision for that, it seems like the sort of thing that would be implemented shortly after joining other pensions became possible.)
It would be advantageous for the plan itself, since there are more investment opportunities and better rates if you have more money to invest.
It would be advantageous for employees who are downsized from the employer, since they'd have the option to keep building up their pension even if they can't find equally pensionable work.
And it would be advantageous for all workers everywhere, because it would lessen the idea (among those very loud people who have this idea) that providing a defined-benefit pension is wasteful and irrational, and call the bluff of people who think that it shouldn't be provided to some workers because it isn't provided to all workers.
Potential pitfall: it might dissuade employers from providing new defined benefit plans.
Potential mitigation: a) Is anyone even providing new defined benefit plans? b) Would it matter if you could just buy into an existing plan?
Potential pitfall: Would it give outsiders control over the plan? I've read that some employers won't let the employee proportion of the contributions exceed 50% (even when they employees offer to pay more to keep the plan afloat, the employer says no) because that would mean they'd have to turn control of the plan over to the employees.
Potential solution: Outsiders sign a contract saying they don't get a share of control over the plan, they're just along for the ride.
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