A new research brief examines the workforce impacts of existing defined benefit (DB) pension plans to assess the likely effects of a switch to defined contribution (DC) individual accounts or cash balance plans.
“The Great Recession: Pressures on Public Pensions, Employment Relations and Reforms” finds that:
- Public employers would attract a different labor force if they switched retirement benefits away from pensions. Public employees would be less committed to employers and thus less likely to invest in nontransferable skills that are critical to delivery of taxpayer services.
- Employee turnover would increase under individual DC accounts and cash balance plans. These types of retirement benefits no longer defer compensation into the future and thus offer fewer economic incentives for employees to stay with public employers.
- Moving from a pension structure would result in higher cost for public employers and employees because of higher investment and administrative costs for alternative retirement plans.
- Public employers and employees overwhelmingly choose to stay with pensions rather than moving to alternative benefits when faced with a choice, illustrating the high value of pensions to public sector employers and employees.