Research has shown that Defined Benefit (DB) plans, or pensions, are cost-effective retirement plans that provide stable benefits. The National Institute on Retirement Security, for example, released a six-state study showing teachers and public employees were better off with a pension plan. You can view our summary of the study here or read the full study here.
Yet, some still argue that closing current pension plans and implementing Defined Contribution (DC) plans, or 401(k) style plans, is cheaper. An analysis from the National Institute on Retirement Security (NIRS) finds that DB pension plans offer substantial cost advantages over 401(k)-style accounts. A DB pension plan can cost 27 percent less than an “ideal” DC plan, with below-average fees and no individual investor deficiencies.