Breaking News (or Not): Public Employees Prefer Defined Benefit to 401(k) Plans

Defined benefit plans are still more popular with teachers than 401(k)s.

Defined benefit plans are still more popular with teachers than 401(k)s.

Granted, they’ve got a Clifford-sized dog in the hunt, but a new study explains why public employees prefer defined benefit plans over defined contribution plans.

Noting a defined benefits plan’s “higher, more secure retirement income compared to a 401(k)-style plan,” the study from University of California, Berkeley compared CalSTRS pension benefits for California public school teachers.

Unsurprisingly, it finds that switching to an account-based retirement system–such as a 401(k) or cash balance plan–“would sharply reduce the retirement income security of teachers.”

“The study clearly shows that most classroom teaching in California is performed by long-career teachers,” Teachers’ Retirement Board Chair Harry Keiley, said in a statement. “This proves conclusively that the CalSTRS plan design benefits an overwhelming number of lifetime educators who are well-positioned to benefit from a traditional pension.”

No research on taxpayer cost or budget deficits in Sacramento were included in the release.

Tilted “Are California Teachers Better off with a Pension or a 401(k)?,” the study’s findings include:

“This study rebuts the myth put forward in several reports which attempt to show that teachers will not benefit, or even vest, in a defined benefit retirement plan,” said CalSTRS Chief Executive Officer Jack Ehnes. “This research clearly shows that, for the overwhelming majority of dedicated educators teaching in California schools, the CalSTRS defined benefit plan exceeds the value of even a generously structured cash balance plan. Since California educators do not receive Social Security benefits for their CalSTRS-covered employment, a modest but secure retirement income is essential for their future.”

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