States that close pension plans face increased costs, retirement insecurity
A new series of case
studies released from the National Institute
on Retirement Security (NIRS) shows that taxpayers’ costs increased when
four states closed their pension plans in favor of alternative plan designs. As
the states shifted new employees from their defined-benefit pension plans to
defined-contribution or cash-balance plans, they did not experience major
improvements in the funding of their existing pensions.
Key conclusions from the research, Enduring Challenges: Examining
the Experiences of States that Closed Pension Plans, include:
from a defined benefit pension plan to a defined contribution or cash balance
plan did not address existing pension underfunding, despite claims that such
changes would improve funding levels or slow growing liabilities of the
retirement plans. Instead, costs for the states reviewed (Alaska, Kentucky, Michigan and
West Virginia) increased after closing their
benefits for new hires does not solve existing funding shortfalls, as the
experience of these states shows. Managing legacy costs is key to responsible
funding of pension plans.
retirement insecurity for employees has been a challenge due to changes in plan
design, leading West Virginia to reopen its closed pension plan.
workforce challenges, such as difficulty recruiting and retaining public
employees, are emerging as a result of the changes to retirement benefits. In
Alaska, the Department of Public Safety lists the ability to offer a pension as
a “critical need” for the department.
Download the NIRS case studies here.