Defined Contribution Pension Plans in the Public Sector: A Best Practice Benchmark Analysis

April 2008
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Public sector employers and employees need and will be seeking better results and flexibility from their core defined contribution retirement plans. While it is not expected that public employers will move away from their core defined benefit plans as a primary method of delivering retirement benefits, interest in defined contribution solutions will continue as public policy makers engage in the continuing efforts to make sure retirement benefits designs remain a good fit in their evolving environmental conditions. The purpose of this paper is to examine best practices for the design of public sector defined contribution pension plans that are intended to be the primary or core source of retirement benefits. The best practices are established from the perspective of providing adequate and secure retirement income as the appropriate primary objective of these plans. The specific elements of the approach for the study include: Identifying basic design principles that support the effectiveness of core defined contribution pension plans. Identifying best practices of plan design that support meeting the basic principles for effective core defined contribution pension plans. Providing a comparative analysis of the plan designs of some of the major existing core defined contribution pension plans in the public sector. Providing a general discussion on how existing public sector core defined contribution pension plans compare to the best practice standards identified and considerations for future plan designs.