Few Governments Have Actually Shifted to Defined Contribution Plans

Wednesday, June 11, 2014

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; only about 11% of public-sector workers have a primary defined contribution plan. Most of the changes made since 2008 have been to establish either hybrid or cash balance plans. 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.