They're only a moral hazard if the plan is permitted to make promises without requiring the promisee to deposit enough funds. And that can only happen for government employee pension plans; private employee pension plans are required by Federal law to follow strict accounting rules which keep the pension fully funded--at any point in time the future expected liabilities must be backed by deposited funds sufficient to cover the liabilities according to a moderately conservative rate of return (e.g. 5-6%).

Private pension plans can and have failed, but that's because corporations sometimes devise clever ways to drain funds. They usually have to do this quickly, though, so it often occurs during mergers and acquisitions where the CFO can shift funds and pay them out as dividends, stock buybacks, or bonuses. Then when the Feds come knocking on the door six months later the CFO moans and cries to the regulators and shareholders[1] about how their pension liabilities are a crippling burden, which is total B.S. because if they hadn't played games the pensions should represent a $0 liability at any point in time. Actually, because of the way the market works--long runs of above average returns followed by sharp below average returns--CFOs just as often claim that their pension funds represent idle money. Of course it's not idle, it's invested in the market, and while those funds are nominally controlled by the employer in reality they're an expenditure no different than the paycheck the cut their employees every other week.

Public pensions, however, aren't required to be fully funded. Politicians are happy to promise huge pensions to placate employee unions without giving a second thought to how they might actually fund those future liabilities today. (Notably, unlike state-government employee pension plans, Federal employee pension plans are kept fully funded as required by separate Federal law, notwithstanding the USPS, which has a complex, unique story of its own.)

A defined-benefit pension is basically just an annuity, and any economist will tell you that annuities are one of the most rational and efficient retirement devices around. The real retirement crisis that we'll see (and which we got a glimpse of during 2008-2010) is when people realize how risky and poorly funded their 401(k) plans are, especially during economic downturns. It's going to be epic particularly because most people only invest 4-5% of their wages into a 401(k) at best, whereas for somewhat historic reasons defined-benefit pension contributions usually represent 20-30% of compensation. Things are going to get nasty....

What we should be doing is incentivizing pension plans, not disincentivizing them. Pension plans should be the dominate retirement strategy. But because the potential for moral hazard is significant when governments make these promises (there's no higher authority to ensure promises are backed by commensurate present funding), we can't rely on government to do this directly. Social Security is very similar to a defined-benefit plan in the sense that there's a set formula for benefits based on wages, and it's a very important safety net we should strive to maintain. But it's just a safety net and we shouldn't expect anything more of it.

A great book explaining the history of pensions and the shift to 401(k)s is "Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers", https://www.amazon.com/Retirement-Heist-Companies-Plunder-Am.... The author was an investigative journalist for the Wall Street Journal, and the book explains in interesting and somewhat technical detail the legal and financial machinations of defined-benefit (pension) and defined-contribution (401(k)) plans.

[1] Investors who conveniently forgot or had no interest in understanding where that windfall they received 6 months earlier came from.

That's a terrible idea. We've seen many cases where companies failed and pensioners had to rely on reduced payments from the PBGC. Sometimes pension liabilities even drive otherwise viable businesses into bankruptcy, which benefits no one. Pension funds also usually assume unrealistic rates of return.

By contrast 401(k) plans are very safe. Once the money is in my account it's mine and can't be taken away without a court order. Even if my employer or the brokerage holding my account go bankrupt I won't lose anything.

You hear about pension failures but you rarely hear about the retirement failures of 401(k)s because it's a distributed problem. There were plenty of these stories during the Great Recession, but you mostly heard about pension crises even though pensions by their nature are designed to and in fact did weather the storm much better.

Plus, as you point out pensions are insured by the PBGC, primarily funded by premiums paid by pensions. Where's the insurance for your 401(k)? There are a lot of problems with the PBGC, some of which relate to the Republican strategy since the 1970s of killing the system of private employee pensions through neglect, but it's still there.

There are many problems with pensions we could identify, but these are fixable problems using the type of technocratic, regulatory work we know how to do well and are still perfectly capable of doing, even in our bitterly divisive society. And in any event the system doesn't need to be perfect, just better than the alternative. Leaving everybody to fend for themselves isn't an actual alternative--it's an ideological position that denies that a problem exists instead of addressing it.

A 401(k) may be the best choice for you, but the social problem we face isn't figuring out how to maximize nradov's retirement wealth, it's how to maximize population wide outcomes.

As I said, annuities are one of the best vehicles for a secure retirement. It's becoming increasingly common for people to invest in variable annuities through their 401(k)s, but these aren't the same thing. For one thing they don't offer the same security as a fixed annuity. For another their payouts will be lower because healthier, long-lived people will self-select into annuities while other people will live shorter, harsher lives than they otherwise would have. It's a collective action problem--everybody is worse off.

Much like with health insurance, in the aggregate and over time (everybody is an outlying insurance risk at some point) people are better off purchasing insurance and annuities through group plans. Well, that's exactly what a pension is--a group fixed annuity!

To be clear, my point is that pensions are misrepresented; that they're not only useful but desirable. What I'm not saying that we should only have pensions or that 401(k) and other investment schemes don't have a place--they're just a very poor mechanism to provide minimum retirement security at scale as compared to defined-benefit schemes.