There is no difference between a defined benefit pension plan and a target date retirement fund, except you avoid the extra agency risk that comes with giving control of your savings to the board of the pension plan and its vendors.
The only defined benefit pension plan that has a leg up on index funds is a taxpayer funded one, because it has the power to tax, assuming the taxing jurisdiction will remain sufficiently economically productive decades into the future (see Detroit for an example of one that did not and hence was able to cut benefits to DB pension recipients).
Personally, I would only value a DB pension paid by the federal government, since it can always print money. Otherwise, give me my 0.03% expense ratio index funds.
No, the benefit of DB plans over target date retirement funds is obvious and undeniable. A DB fund offers participants a guaranteed benefit with the additional risk of taking a haircut in bankruptcy. A target date index fund offers no such guarantee whatsoever. Further, a pension can provide equivalent benefits of individual retirement accounts much cheaper. Who will pay fewer basis points for the target date fund, you or a billion dollar pension?
What happens to the proportion of workers who buy the target date fund (even narrowing ourselves to the ones who contribute appropriately and so on) who effectively outlive their money? Kicked to the curb?
Investment target date plans are optional and still include the challenges of people executing roll overs, taking loans, cashing out with penalties, and actually choosing the right investment target date plan. Pensions are not optional, you can’t cash them out, you can’t take a loan, and they don’t require any logistics to maintain after you’ve moved on. The biggest flaw of 401ks is their optionality which allows present self to buy a new car making retired self homeless.
You (and I) aren’t the issue here - it’s the majority of people who are unsophisticated. They are autopiloting through life, assuming social security is a retirement plan or that they’ll save later when they’re closer to retirement. This is an awful lot of people. The truth is as a society we will be carrying them in their old age because we didn’t pay up front, instead we set up an optional plan assuming they would pay up front. Instead we will collectively be figuring out a way to deal with the massive underprepared aged population using present dollars rather than compounded dollars.
I think you're conflating "mandatory participation" with "defined benefits". You seem to want a system that prevents future-damaging choices by participants.
I think the other argument going on above is that "defined benefits" isn't actually possible without some escape mechanism (like tax collection) to provide the benefits when it turns out the fund didn't perform as well as hoped. When a private pension fund gets in trouble, its participants lose their safety. The others want a system that prevents future-damaging choices by fund operators, and see defined contributions as the only viable way to do this. You own a chunk of the fund and can transfer it to different stewards.
If they didn’t, PBGC would have easily failed. The whole thing is an excercise in who has sufficient political power to get bailed out, and if I am playing that game, why not just directly put my hand in the SP500 and ensure I am bailed out directly rather than maybe via proxy.
The only defined benefit pension plan that has a leg up on index funds is a taxpayer funded one, because it has the power to tax, assuming the taxing jurisdiction will remain sufficiently economically productive decades into the future (see Detroit for an example of one that did not and hence was able to cut benefits to DB pension recipients).
Personally, I would only value a DB pension paid by the federal government, since it can always print money. Otherwise, give me my 0.03% expense ratio index funds.