Pension Reform and Transition Costs
North Dakota Interim Retirement Committee
5
May 23, 2022
Pension Reform and "Transition Costs"
■ To mitigate the risks that have led to major underfunding in traditional defined
benefit pension plans, many government employers have shifted new
employees over to new and lower-risk retirement plan designs:
Risk-managed defined benefit (DB) pensions,
Defined contribution (DC) retirement plan,
Hybrid DB+DC plans, or
Cash balance plans.
A common but misguided objection to such policy reforms-particularly DC
plans is the idea of a so-called "transition cost".
■ While taking different forms, this generally involves a mistaken belief that
setting up new employees with a new retirement plan will require substantial
money upfront to pay down unfunded liabilities in the legacy pension plan.View entire presentation