More states will create hybrid plans in the future because of the less-volatile contribution levels and the fact that the defined contribution components are portable for a workforce that is now increasingly more mobile, according to a new report from the TIAA-CREF Institute and the Rockefeller Institute of Government.
“There are pluses and minuses to the two fundamental (defined benefit and DC) structures,” Paul Yakoboski, senior economist for the TIAA-CREF Institute, said in a telephone interview. “We have to figure out a way to move away from the DB vs. DC debate, (in terms of choosing) one or the other. … There's a lot of flexibility in how a DC plan can be arranged.”
Mr. Yakoboski co-authored the new report, which suggests state officials planning pension reforms should consider key issues such as retirement income, changing workforce patterns and long-term effectiveness.
The report stems from a forum held in December with state and local officials, union leaders and researchers across the country.
“There was basically a message that, even if finances have driven (governments) to considering reform … let's get it right in context of being fiscally prudent, but in the process of changing (plans), let's have something that works for employers and the workforce,” Mr. Yakoboski said.
Much of the forum was spent discussing different reforms states have enacted and looking at the key areas states and local governments should consider. All the speakers and attendees' comments at the forum were driven by finding ways of replacing retirement income, Mr. Yakoboski said.