Over the last few decades, a majority of private sector employers have abandoned defined benefit (DB) pension plans, which guarantee beneficiaries a lifetime of monthly benefits irrespective of the fund’s fiscal health, in favor of defined contribution (DC) plans, which are individual accounts that employers and employees can make contributions into.
One of the major reasons for the private sector’s transition away from DB plans is that they don’t make long-term financial sense, a point that I made in a recent a Fort Worth Star-Telegram op-ed that calls attention to Texas’ $57.5 billion of unfunded pension liabilities. But in spite of concerns over DB plans’ durability, the status quo persists in the public sector—likely to the detriment of taxpayers and beneficiaries alike.
To get a better sense of how far apart the private sector and the public sector are on pensions, here’s an informative chart from the Texas Comptroller’s report Your Money and Pension Obligations. As you can see, there are two very different views in play when it comes to offering a secure and sustainable retirement.
Source: Texas Comptroller, Your Money and Pension Obligation