Among 180 large U.S. cities and counties that administer their own plans, the percentage that has moved away from a traditional defined benefit plan model increased between 2001 and 2018, according to an issue brief from the Center for State and Local Government Excellence.
In 2018, 34 plans, or 18.9% of the total analyzed, offered an alternative plan such as a cash balance plan, hybrid plan or traditional defined contribution plan, compared to 19 plans, or 10.6% of the total, in 2001.
According to the brief, self-administered city and county plans are more likely to switch to a hybrid plan or DC plan model in states where alternative plan designs have been used by the state-run plans.
Since 2009, a total of 13 plans have switched to alternative designs. Seven have switched to traditional DC plan structures, and three each have switched to cash balance plans and hybrid plans.
According to the issue brief, cost reduction has been the main reason for the changes, with employer contribution rates becoming lower in new plan designs. However, the cost changes have not been hugely significant.
Because all 13 plans changed to alternative plan designs for new hires only, more than two-thirds of employer contributions still fund pension benefits promised to past employment in city and county governments, according to the brief.
The issue brief is available on the Center for State and Local Government Excellence's website.
