Study Examines Defined Benefit Plans

August 25, 2011

A new study finds that so-called defined benefit plans, including the one for city employees here in Houston, are much more cost-effective for local taxpayers than plans that include 401k's.

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examining money The study was commissioned by the Texas Association of Public Retirement Systems and found that defined benefit plans like the one for municipal employees here, cost much less than what are known as defined contribution plans. Joe Gimenez is with the association.

"The methodology that was used by the actuary, found that for the profiles of Texas workers in the San Antonio, Houston and Austin defined benefit plans, the cost to taxpayers ranged from 39-44 percent less than the defined contribution costs to provide the same level of retirement benefits."

Defined benefit plans have been under fire in some cities because of their drain on local budgets. Many plans for public employees across the nation are underfunded. The study was done by Pension Trustee Advisors.

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