National Association of State Retirement Administrators

Costs of Changing Plan Design

So far there has been no large scale shift in plan design for the primary pension benefits of state and local government employees; although it has been proposed and studied in a number of states as well as at a macro level.

A 2008 study by the National Institute on Retirement Security, updated in 2014, found that defined benefit plans are 48% more cost efficient than defined contribution plans when measured at any level of retirement benefit. This is largely because defined benefit plans pool longevity risks or large groups of people as opposed to defined contribution plans which are designed to provide benefits to one individual. Defined benefit plans also enjoy greater returns on investment due to professional management and the advantages of economies of scale. 

There are advantages and disadvantages to defined benefit and defined contribution plan designs, both to the individual retiree and the organization administering the plan.

State Studies Addressing Costs of Changing Plan Design

NASRA Resources

Other Resources