What is the Cost of Transitioning from a DB Plan to a DC Plan?

Source: National Conference on Public Employee Retirement Systems, NCPERS Research Series, April 2015

Will closing your Defined Benefit (DB) plan and moving some or all employees to a Defined Contribution (DC) plan be the promised panacea? If getting the most for each dollar going into the plan makes a difference in your decision making there is much to consider. If partnering with employees to create a secure retirement and to be active economic participants in your community after retirement is important, dig deeper. These outcomes are highly unlikely to occur with a DC plan being the primary retirement arrangement because research demonstrates that DC plans are at least 20% less efficient in delivering retirement benefits. Before making such a monumental change decide for yourself on the costs and merits of transitioning away from a primary DB Plan. This paper examines the cost associated with transitioning from a defined benefit (DB) plan to a defined contribution (DC) plan. It also explores the cost difference of these two plan types in delivering retirement benefits….