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.