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Old 01-10-2012, 02:34 PM
awriter awriter is offline
Join Date: Nov 2002
Posts: 224

Some states are looking/have looked at switching to defined contribution plans as a way to "stop the bleeding" so to speak. If all the contributions required for the current DB plan are channeled into a new DC plan, doesn't that hurt the existing DB plan? In fact, doesn't that accelerate plan maturity and argue for a lower discount rate to measure the present value of the liabilities? What are the pros and cons of this move toward DC plans for public pension plans?

One of my concerns about the huge shift away from DB plans to DC plans in general is that it may provide a benefit to the plan sponsor, but it may (probably will) increase the likelihood that retirees don't have enough savings/income to live on after they retire or otherwise become unable to work (unemployment, ill health, etc.). This would be particularly true for employees at the lower end of the pay scale. Has anyone seen studies projecting the degree of preparedness/unpreparedness of future retirees coming out of DC plans?

Thanks for your thoughts about these questions!
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