Corporate Governance

A study examining the public?s perception of defined benefit vis à vis defined contribution plans -- entitled ?The New Intersection on the Road to Retirement: Public Pensions, Economics, Perceptions, Politics & Interest Groups? -- was recently presented at the Wharton School?s Pension Resource Council?s symposium: The Future of Public Employee Retirement Systems. The authors looked at what factors influenced public attitudes toward pension plans, advocacy by certain interest groups for a switch from defined benefit to defined contribution plans, and the effects of such advocacy.

The paper reported some good news about defined benefit plans in the public sector and why efforts to move away from them are not seeing as much success as those interest groups had hoped. Among other things, public plan retirement assets were twice as great as the private sector; earnings on investments paid for three-quarters of benefits over the last 10 years; and, perhaps most important, only one-fifth of contributions come from the employer (i.e., the taxpayer). Moreover, the GAO has reported that ?public sector defined benefit plans as a group are generally well-funded and on track to being fully funded? and that fully funding plans is projected to have a very modest fiscal impact of less than 1% of payroll. You can view the presentation here: Download PRC.pdf.

Additional papers presented at the Symposium can be accessed from the Council?s website here (free registration required).