New Study Affirms Public Employees’ Strong Support For Defined Benefit Pension Plans Versus A 401K


August 30, 2017

August 30, 2017


The proposal to dump public-sector workers into 401K retirement plans is all the rage when states and lawmakers are looking for ways to save taxpayer dollars, but not so fast.

Another study, this time by the National Institute on Retirement Security, has found that:

  1. Employees directing their own investments in a 401K plan typically tend to earn lower returns than state pension plans. NIRS attributes this to four factors: lower expenses, professional management, an optimal investment allocation used by the DB plan and the benefit of longevity risk pooling.

  2. Rather than lower costs by moving from a DB to a 401K plan, states actually experience increased retirement costs for themselves and taxpayers. Thus, NIRS says in its report, “Changing from DB to a 401K plan does not solve the underlying funding problems a state may be experiencing.”

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