In a “hard freeze,” a company closes the plan to new employees and freezes benefit accrual, too. In a “soft freeze,” no new employees can join the plan, but workers already participating in it continue to accrue benefits. Many of the today’s remaining defined benefit plans have been “frozen.” This means the company is phasing out its retirement plan, though it’s waiting to do so until the enrollees surpass the age requirement. This has led to the shift in responsibility from employers to employees. In addition, more and more workers are hopping from job to job every few years rather than staying for the long haul. Nowadays, having a generous 401(k) with a high employer match is the new gold standard for employees. Between their defined benefit plans and Social Security benefits, workers could expect to sail into a dignified retirement.

It was not until 1978 that 401(k) plans became possible, and they didn’t catch on until several years after that. In turn, a pension that increased in value the longer you stay with the company helped to keep employees on. If you’re wondering why a company would do this, decades ago a company could reasonably expect many of its workers to stick around for the duration of their careers. The company bears the risk of stock market fluctuations, meaning that the worker doesn’t have to worry that a downturn will make retirement unaffordable. In retirement, the workers draw a dependable check from the company plan, regardless of how the market performs, which makes the benefits defined. Using a formula based on each worker’s salary, age and time with the company, an employer will pay into and manage a retirement plan. In a defined benefit plan, a company takes charge of its workers’ retirement income.

Definition befit