Pension Reform and Transition Costs
North Dakota Interim Retirement Committee
13
Plan Design Discussions
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DC
May 23, 2022
Milliman said they would present on Michigan and West Virginia for background on DB to DC
swap.
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Important that Milliman also looks at Oklahoma, which has a fully funded pension after their transition.
While Michigan has had a long history of DC design improvement in their Public Employees plan, we built
the Michigan Teacher choice-DC plan which is an exemplary model.
West Virginia suffered from a poor DC plan design along with a failure of policymakers to properly fund the
legacy pension-both were avoidable through better design.
Committee asked to look at opening loan and hardship provision in current DC and 457 plans.
Just as you can't borrow against a pension, one should not be able to borrow against an account in a DC
retirement plan intended to serve as a primary retirement vehicle.
"No borrowing against DC account balances" is a best practice in our policy paper: Best Practices in the
Design and Utilization of Public Sector Defined Contribution Plans.
Cash Balance
Milliman stated that a CB has the same sort of contribution volatility as a DB plan, but our
actuarial modeling for the Texas' Employees Retirement System swap to a CB last year
suggests less volatility.
Milliman also stated that the surge in private sector CB plans was a way to "mask a benefit
reduction for employees because they can't compare apples to oranges like actuaries can."
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Benefit levels and generosity are entirely policy decisions of the legislature, and not a function of the
plan type.
As you saw from the retention charts, having a more portable option like a CB, DC, or hybrid would benefit a
larger number of employees.View entire presentation