Defined Contribution Plans in the Public Sector: An Update

The brief’s key findings are:

• Although the introduction of defined contribution plans by some states has received considerable press attention, activity to date has been modest.
• Moreover, most recent shifts involve either hybrid plans or cash balance plans, rather than stand-alone defined contribution plans.
• The changes appear driven by a desire to avoid future unfunded liabilities, to reduce investment and mortality risk, and to help short-tenure workers.
• Such changes transfer risk to participants but, if the new plans enhance the likelihood of responsible funding, they could also offer some increased security.