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Public pensions trump DC plans in cost, worker preference

Public sector employees prefer defined benefit pensions over 401(k)-type defined contribution individual accounts, according to a study released today by the National Institute on Retirement Security and Milliman Inc.

By Paula Aven Gladych | Updated on September 29, 2011

Public sector employees prefer defined benefit pensions over 401(k)-type defined contribution individual accounts, according to a study released Thursday by the National Institute on Retirement Security and Milliman Inc.

The study also found that defined benefit pensions are more cost efficient than defined contribution accounts because of higher investment returns and longevity risk pooling. DC accounts lack supplemental benefits, such as death and disability protection. These can still be provided, but require extra contributions outside the DC plan, which are therefore not deposited into the members’ accounts.

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