INsider: This just in — D-B plans rock

Public employees are often lambasted by the public, but on the whole, government workers know which end is up. In fact, they're pretty darn smart — particularly when it comes to retirement planning. The proof of this intelligence can be found in a study published by the National Institute on Retirement Security, which found that when given a choice between a pension and a 401(k)-type retirement plan, the vast majority of public employees would pick the pension. Most nongovernment workers would likely make the same choice — in a nanosecond — if pensions were still offered in the private sector. As the institute points out, defined-benefit plans offer a guaranteed payout — and the employer, not the employee, is on the hook if a plan comes up short. In defined-contribution plans, the employee takes all the risk, receiving nothing more than the account's balance at retirement. The study analyzes seven state retirement systems that offer a choice between defined-benefit and defined-contribution plans and found that pension uptake rate ranges between 98% to 75%. The study did not attempt to explain the thinking of those who opted out of a D-B plan. In the private sector, participation in defined-benefit plans dropped from 76% in 1986 to 24% in 2008 as employers balked at making never-ending contributions to cover pension-fund shortfalls. Public-sector employees have been largely insulated from that trend, with participation in D-B plans dropping from 93% of full-time employees in 1987 to 88% in 2008, according to the study. Most state and local governments still provide pensions to their employees, the study said, though a handful of states have begun to offer a choice between a pension and a 401(k)-type plan. “These findings are not surprising and are consistent with NIRS' recent opinion poll, which found that 83 percent of Americans believe those with pensions are more likely to have a secure retirement,” said Ilana Boivie, co-author of the report and an economist with the National Institute on Retirement Security. In another survey, private-sector employees, by a nearly 2-to-1 ratio, said they preferred getting free cake to getting beat about the head with a rubber mallet.