It has been a shared experience, and not a good one. Research by the National Institute on Retirement Security (NIRS) shows that while nearly every U.S. state, since 2009, has modified retirement systems, a shift from DB to DC has not produced promised savings, but did create related problems.
“Advocates of switching from DB to DC plans position the change as reducing employer costs for unfunded liabilities, but the move to DC accounts does nothing to reduce plan liabilities on its own. At the same time, significantly reduced retirement benefits under the DC savings plan create other workforce challenges, such as difficulty in recruiting and retaining public employees, NIRS says,” writes Rebecca Moore for Plan Sponsor.
The NIRS reviewed the situation of Palm Beach, Florida, which it says offers “an important cautionary tale on the detrimental impacts of switching public employees from DB pensions to DC accounts,” writes Moore. The town closed its DB plan in 2012, including for police and firefighters. The move was made in the wake of the financial upheaval of the Great Recession.
“The NIRS reports that the reaction of existing protective service officers to seeing their pension benefits frozen was swift. Retirements accelerated dramatically,” writes Moore. “Because the only way younger public safety officers could obtain a better pension was to leave the town’s police and fire departments, those existing employees who did not retire looked for opportunities in nearby local jurisdictions.”
More: Town council voted in 2016 to abandon the DC model, improving the DB model.

ARIA provides a forum for an informed discussion on retirement income adequacy, and other related issues, including pension and retirement coverage, and defined benefit pension plans – ARIA pensions blog, 12 Dunlop Street, Barrie, ON, L4N 1V6 – sitemanager@ariapension

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