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Defined Contribution Plans In The Public Sector: An Update

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SOURCE Center for State and Local Government Excellence

New Center for Excellence issue brief finds in spite of much discussion, defined benefit plans still dominate.

WASHINGTON, April 24, 2014 /PRNewswire-USNewswire/ -- The 2008 financial crisis prompted many state and local governments to make changes to their defined benefit pensions, most often raising employee and employer contributions and reducing benefits for new employees.

A new issue brief from the Center for State and Local Government Excellence, Defined Contribution Plans in the Public Sector: An Update, finds that while there has been much discussion of shifting from defined benefit to defined contribution plans, relatively few governments have actually done so.

Written by Alicia H. Munnell, Jean-Pierre Aubry, and Mark Carafelli of the Center for Retirement Research at Boston College, the brief finds that defined benefit plans still dominate and only about 11 percent of public sector workers have a primary defined contribution plan. 

Other key findings include:

  • Post-2008 changes have been to establish 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.

In particular, the brief looks at hybrid plans established by Georgia, Michigan, Rhode Island, Utah, Tennessee, and Virginia, and cash balance plans in Kansas and Kentucky.

This brief updates 2011 Center research on defined contribution plans in the public sector (http://slge.org/publications/a-role-for-defined-contribution-plans-in-the-public-sector).

Read the full brief at http://slge.org/publications/defined-contribution-plans-in-the-public-sector-an-update.

Access all Center retirement research at http://slge.org/research/retirement

About the Center for State and Local Government Excellence
The Center for State and Local Government Excellence helps state and local governments become knowledgeable and competitive employers so they can attract and retain a talented and committed workforce. The Center identifies best practices and conducts research on competitive employment practices, workforce development, pensions, retiree health security, and financial planning. The Center also brings state and local leaders together with respected researchers and features the latest demographic data on the aging workforce, research studies, and news on health care, recruitment, and succession planning on its website, www.slge.org.

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