Magazine article Government Finance Review

Public Employees Overwhelmingly Choose Pensions as Retirement Plan over Defined Contribution Plans

Magazine article Government Finance Review

Public Employees Overwhelmingly Choose Pensions as Retirement Plan over Defined Contribution Plans

Article excerpt

Public-sector employees with a choice over their retirement benefit overwhelmingly choose defined benefit (DB) pension plans over defined contribution (DC) individual accounts, according to a report from the National Institute of Retirement Security. Eight states that offer employees such a choice were studied, and the 2015 DB pension take-up rates among six of those states were 80 percent or higher. Two of the plans studied had pension take-up rates higher than 95 percent, while Florida and Michigan had take-up rates of 76 percent and 75 percent, respectively

The research finds that even when the retirement plan default option favors a DC plan, most employees still select a DB pension plan - a significant finding. For example, in Washington, the default retirement plan is a combination DB/DC plan. Employees must affirmatively act to elect to participate in the DB pension plan instead, and they do. The majority of newly hired employees - six out of every ten new hires - actively choose a pension plan.

The report, "Decisions, Decisions: An Update on Retirement Plan Choices for Public Employees and Employers," indicates that Americans strongly support pensions for providing economic security in retirement. …

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