"By pooling the longevity risks of large numbers of individuals, DB plans allow plan sponsors to make contributions based on average life expectancy of their members. The money thus accumulated enables a DB plan to provide their members with a guaranteed retirement income for life no matter how long they live," the report's author, William B. Fornia, wrote.

Achieving lifetime security through a defined contribution plan is much harder because an individual in a DC plan must make contributions to cover his maximum lifetime expectancy, which is considerably more expensive, the report found. "If an individual lives longer than expected and has not contributed adequately, he or she is in danger of running out of money. Consequently, DB plans are able to do more with less."

Defined benefit plans also can balance risk across generations so participants can take advantage of a balanced portfolio throughout their lifetime. Financial advisors tell DC contributors they need to constantly rebalance their portfolios to stay up on what is going on in their own lives. Younger people invest in riskier options, like stocks, and move to more conservative investments as they age. Consequently, they miss out on having the gains that come with additional risk in their later years, the report found.

A June report by the National Institute on Retirement Security, called "Lessons from Well-Funded Public Pensions: An Analysis of Six Plans that Weathered the Financial Storm," used the New York State Teachers' Retirement System as one of its examples of a pension system that did all the right things, even in the midst of the 2008 market downturn.

The report found that New York STRS and the other five pensions remained affordable and sustainable over the long haul because they followed six rules of plan design: Employer pension contributions that pay the full amount of the annual required contribution (ARC), and that maintain stability in the contribution rate over time; employee contributions to help share in the cost of the plan; benefit improvements such as multiplier increases that are actuarially valued before adoption and properly funded upon adoption; cost of living adjustments that are granted responsibly, for example through an ad hoc COLA that is amortized quickly or an automatic COLA that is capped at a modest level; anti-spiking measures that ensure actuarial integrity and transparency in pension benefit determination; and economic actuarial assumptions, including both the discount rate and inflation rate, that can reasonably be expected to be achieved over the long term.

When New York STRS experiences unexpected investment gains, its strategy is to delay recognition of as much of the unexpected investment gains as possible across the next four years so that its employee contribution rate will not decline as much and there is more surplus left over to offset any potential deficits in the future.

The plan also has an automatic compound cost-of-living-adjustment of half of CPI applied to the first $18,000.

Another benefit to DB plans is that they are pre-funded. New York City's employers and employees make contributions to a common pension trust fund over the course of a worker's career. These investment earnings compound over decades and can do much of the work by paying benefits. Between 1984 and 2010, 61 percent of the New York City pension fund receipts were from investment returns, the NIRS report found.

These practices have helped keep the New York STRS plan afloat during hard times. According to "Lessons from Well-Funded Pensions," the teacher's pension plan had a 25-year average return of 9.8 percent, despite a 20.5 percent drop in 2009 and a 6.4 percent drop in 2008.

The New York report found that the teacher pension saved 10 percent through longevity risk pooling, 4 percent through maintenance of portfolio diversification and 22 percent in superior investment returns over equivalent defined contribution plans. The other four New York pension plans in the study had similar results, with civilian worker and sanitation worker pensions saving 13 percent on longevity risk pooling, 4 percent through maintenance of portfolio diversification and 21 percent through superior investment returns. The police and fire fighter pensions saved 10 percent through longevity risk pooling, 5 percent through maintenance of portfolio diversification and 22 percent through superior investment returns.

"This is an important factor for policy makers to consider, especially with respect to public sector workforces, where tax dollars are an important source of funds for retirement benefits," the report concluded. "DB plans are a more efficient use of taxpayer funds when offering retirement benefits to state and local government employees."