Public-sector pensions for new employees must become defined-contribution plans, as in the private sector.
They are replacing them with defined-contribution plans, savings schemes into which employees and employers put regular contributions.
In the 1980s, however, companies moved away from guaranteed pensions, instead offering so-called 401(k) plans, or defined-contribution plans.
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In the long run, defined-contribution plans that most corporations have embraced will also be adopted by local and state governments.
We should add that StudentsFirst hasn't even strongly advocated for switching teachers to defined-contribution plans in New York because the political prospects are nonexistent.
It seems clear, though, that Americans have won more responsibility for their retirement portfolios as firms switch from defined-benefit pension plans to defined-contribution plans.
But defined-contribution plans also have a significant foothold in the public sector: most public universities, where faculty have been covered by defined-contribution plans for decades.
Instead, defined-contribution plans put all of the risk on untrained employees.
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At the time of the great Wall Street crash of 1929, 10, 000 companies in America had defined-contribution plans in place (although not in their present form).
With the shift from defined-benefit plans to defined-contribution plans, and the uncertain future of social security, boomers are on their own when it comes to financing retirement.
For starters, the majority of defined-contribution plans haven't added the Roth 401(k) in-plan conversion option since it was created by a federal law nearly two years ago.
Typically, public employee unions cling tightly to defined-benefit pensions: only a handful of states, including Michigan and Alaska, have had much success moving non-university employees to defined-contribution plans.
Companies have also, sensibly, been switching from defined-benefit schemes, under which the company bears the risk of maintaining pension payments, to defined-contribution plans, in which the risk lies with individual pensioners.
Most private-sector employees have defined-contribution plans, which determine how much employers and employees pay in but not how much pensioners will get out, and which have shrivelled with the stockmarket since 2008.
The standard response of companies to the pension crisis of recent years has been to close their schemes to new members, plug the deficits from profits and set up less generous defined-contribution plans for new staff.
He attributes this to several factors: the abolition of mandatory retirement in 1986, changes to the government pension that raised benefits for those retiring after 65, and the decline in defined-contribution plans which penalised late retirement in financial terms.
We live in an age dominated by defined-contribution retirement plans, where workers make their own investment choices.
Many open people spend their careers without thinking much about what they're accumulating in their pensions and defined-contribution savings plans.
Those, of course, largely have been replaced with 401(k) and other "defined-contribution" plans, in which workers shoulder all of the risk involved in making their savings last.
Now that the mutual fund scandals are ancient history and the SEC (speaking on behalf of the mutual fund industry) assures us that the few problems that ever existed in the industry have been eliminated (none of which the SEC uncovered on its own), attention has shifted to abuses involving retirement plans that generally use mutual funds- the defined contribution plans.
Who would have thought that this broad-based attack upon defined contribution plans would follow the well- documented demise of defined benefit plans?
The proportion of private industry employees participating in 401(k)-style defined contribution plans rose from 36% in 1999 to 43% in 2008, according to Investment Company Institute data.
To punish private sector defined contribution plans and reward public sector defined benefit plans is egregiously self-serving.
The rest have only defined contribution plans, such as profit-sharing plans and 401(k)s.
But most importantly, governments must move away from the defined-benefit model and shift employees to defined-contribution retirement options like 401(k) and 403(b) plans.
The same kinds of defined contribution plans, they figured, could work at larger self-insured employers, even though these big companies and their employees would not get quite the same tax advantages.
Defined contribution retirement plans, in addition to shifting responsibility for investment decision-making onto workers, almost always force workers into higher cost, poorer performing retail oriented investment options.
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