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.