Defined Contribution Plans in the Public Sector: An Update

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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.