West Virginia began a defined contribution plan for teachers a few years ago. Colorado and Washington provided defined contribution plans as part of a mix of plans offered to teachers. Despite claims to the contrary, defined benefit pension plans still provide the best benefit to retired workers and to workers planning their retirement. Defined benefit plans are not only better for employees, but are also better for employers, and are simply better public policy. Employees are not subject to investment risk.
Pension funds invest assets with an optimum mix of growth potential and risk.
Studies show that individuals responsible for their own retirement income typically invest too conservatively, and thus do not adequately protect their retirement benefits from inflation. Retirement benefits are not dependent on employees ability to save. Lower-income workers and workers facing declining incomes lose twice under defined contribution plans, where employer contributions are often tied to employee savings. While defined benefit plans often have mandatory employee contributions, their contributions provide workers with a secure retirement. Death and disability insurance, which are typically provided under defined benefit plans, provide income security for participants.