By John Iekel
Source: American Society of Pension Professionals & Actuaries
Defined contribution plans have outstripped defined benefit plans in number of accounts, assets, employers offering them and participants. But a recent study that examines the cost of both kinds of plans challenges the notion that bigger is synonymous with better.
In “A Better Bang for the Buck 3.0: Post-Retirement Experience Drives Pension Cost Advantage,” National Institute for Retirement Security (NIRS) Executive Director Dan Doonan and Pension Trustee Advisors President William Fornia examine whether DC plans are better than the DB plans that they are in many cases supplanting. They zero in on the relative costs of DB plans versus those of DC accounts in their study.
Setting the table, Doonan and Fornia note that over the past four decades, private-sector employers have shifted from DB plans that provide employees with a steady retirement income stream to DC plans in which individual workers manage their own investments and bear the risks.