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An Update on Retirement Plan Choices for Public Employees and Employers (PDF)

38 pages. "When given the choice between a primary DB or DC plan, public employees overwhelmingly choose the DB pension plan. DC plans are less cost efficient than DB plans, due to lower investment returns, and the lack of longevity risk pooling. Some states have considered moving employees from a DB-only to a DC-only structure in an attempt to address an unfunded liability. Making this shift, however, does nothing to close any existing funding shortfalls, and can actually increase retirement costs. Traditionally, employers bear most of the risk in DB plans, and employees bear most of the risk in DC plans. The public sector has always had cost sharing in its DB pensions and employees have experienced increases in their portion of plan contribution in recent years."

Public Sector Employees Prefer DB over DC Plans, According to Survey

The study, Decisions, Decisions: Retirement Plan Choices for Public Employees and Employers, was conducted by the National Institute on Retirement Security (NIRS) and Milliman. It analyzes seven state retirement systems that offer a choice between DB and DC plans to find that the DB uptake rate ranges from 98%-75%. The percentage of new employees choosing DC plans ranges from 2%-25% for the plans studied.