Study Finds DC Plans May Have a Role in Public Sector

The Center for Retirement Research has found that defined contribution plans may have a role in the public sector, but in combination with, not as an alternative to, defined benefit plans.

After looking at the hybrid plans introduced in Georgia, Michigan, and Utah, researchers for the Center for Retirement Research at Boston College concluded that hybrids consisting of slimmed-down defined benefit (DB) plans and defined contribution (DC) plans operating in parallel reflect sponsors’ recognition of the need to balance the risks to employees and the risks to taxpayers.   

The CRR contends that a preferable approach may be a “stacked” arrangement, in which meaningful DB plans could remain as a secure base for the typical public employee, and DC plans could be “stacked” on top to provide additional retirement income for those at the higher end of the pay scale.   

“Such an approach would ensure a more equitable sharing of risks and would also prevent headlines generated by the occasional inflated public pension benefit,” the researchers concluded.  

The complete study report is available here.