Educating retirement plan participants is key to a sustainable plan design, said executives of U.S. retirement systems during the Pensions & Investments' Global Future of Retirement conference in New York on Tuesday.
Panelists also named improving reserves and managing contributions as significant considerations when maintaining a sustainable structure.
Kimberly Shockley, associate director of college and retirement savings plans at the Rhode Island Office of the General Treasurer, Providence, said that during the state's transition to a hybrid system from a defined benefit plan in 2012 — the employees of the treasurer's office struggled to adjust because they didn't know whether the new plan was there to stay. But the education was important because as participants move closer to retirement their pension plan will be supplemental to the 401(k) plan within the hybrid system.
"We want to teach people about both plans," Ms. Shockley added.
Amy Bishop, director at the $24 billion Texas County & District Retirement System, Austin, speaking on the same panel, added that regardless of the funding level or type of the plan — whether it is a DB plan or cash balance plan — it is important to maintain reserves, which during an economic downturn would to help offset investment losses.
Todd Bower, trustee at the $4.1 billion Colorado Fire & Police Pension Association, Greenwood Village, added that making additional contributions totaling 4% over an eight-year period made it more likely for participants to get to a 20% cost-of-living adjustment in the future, for which the plan was designed.