A Role for Defined Contribution Plans in the Public Sector

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The brief’s key findings are:

  • In recent years, several states have shifted from defined benefit (DB) to defined contribution (DC) pension plans.
  • Many of the new plans are “hybrids” with a slimmed down DB plan and a minimal DC plan, which shifts substantial risk to employees.
  • A better hybrid design could offer a full DB plan up to an income cap and “stack” a DC plan on top for those with higher incomes.
  • The “stacked” approach would give those with modest incomes the full protection of a DB plan while limiting taxpayers’ commitment to those with higher incomes.