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Move Public Employees Into 401(k)s?

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Public employees in Wisconsin and other states are being asked to contribute more toward their pensions. But in some states, there are efforts to shift new government employees out of the traditional pension plans to 401(k)-style investments.

Georgia, Michigan, Alaska, Colorado, Ohio and several other states have taken some steps in that direction, and other states, including Texas, are considering their own plans.

Many government officials are embracing the idea because it shifts the risk from the employer (or taxpayer) to the worker. The private sector has all but abandoned traditional pensions, which are defined benefit plans, to 401(k)s, which are defined contribution plans. Surveys have shown that many workers in 401(k)s have not saved enough for retirement. According to research cited in a recent Wall Street Journal article, for example, "the median household headed by a person aged 60 to 62 with a 401(k) account has less than one-quarter of what is needed in that account to maintain its standard of living in retirement."

What would be the consequences of a shift to 401(k) plans for public employees? What have we learned from the private sector's experience? What has worked and what hasn't?

Responses:

A Bad Deal for Taxpayers
Teresa Ghilarducci, New School for Social Research

Automatic Enrollment Is the Key
David C. John, The Heritage Foundation

High Risks, High Costs
Alicia H. Munnell, Center for Retirement Research

Start Paying or Stop Promising
Joshua D. Rauh, Northwestern University

A Cash Cow for Wall Street
Monique Morrissey, Economic Policy Institute

Lessons From the Private Sector
Jack VanDerhei, Employee Benefit Research Institute


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