Benefit math: With DB, 1+1=3

Now consider two corporate mega-trends: the drives toward greater transparency and more accountability. And as with all such "master themes," these two have had a huge impact on benefit plan theory and design. The subsidies inherent in benefit plans have become clearer (more "transparent") to everyone - sponsors, participants and policymakers. And the utility and fairness of those subsidies has been challenged (called to "account"). Again, the same is true for benefits. Critically, and in the context of a common enterprise, benefit plans are a place where the diverse needs of employees can be "bundled." It is where that same 1 + 1 = 3 "magic" can be used to reduce employee risks and arguably raise overall productivity. For employees, those risks - their own and their family's health and provision for their retirement - are profound. And the enterprise often can provide for them more efficiently than they can themselves. A strict (admittedly transparent and accountable) account-based approach to benefits squanders this diversification opportunity. For the enterprise, diversification of employee risks - and the gain in reduced overall risk associated with it - is free. For the individual on his or her own, it is expensive. It's the difference between group health and a private policy or between institutional and retail investment management fees. In fact, it's the difference between a mere "account" and a plan that responds to the needs of members as part of an enterprise.