Have Localities Shifted Away from Traditional Defined Benefit Plans?

A new issue brief highlights changes in local government retirement plans as compared to state plans with respect to shifts away from traditional defined benefit structures.

The key findings are:

• In 2018, 19 percent of large localities had a defined contribution (DC), cash balance, or hybrid plan for new hires, instead of a stand-alone defined benefit (DB) pension
• The volume and geography of alternative plans at the local level is similar to that of states, but localities are more likely to offer a DC plan.
• Government contribution rates for the local alternatives are lower than for the DBs they replaced, and employees are likely to see lower investment returns.
• Any cost reduction will be gradual as the alternative plans are primarily for new hires.