Study Shows DC Plans Would Cost Texas Taxpayers More Money

August 26, 2011 ( – Pension Trustee Advisors (PTA), a consultancy on public pension systems, says its study has found defined contribution plans would cost taxpayers substantially more than defined benefit plans for public sector employees.  

The PTA study, initiated at the request of the Texas Association of Public Employee Retirement Systems (TEXPERS), calculated the costs of achieving a target retirement benefit for employees and expresses this cost as a level percent of payroll over a person’s career in the public sector. The defined benefit plans cost about 40% less than 401(k)-type plans would cost.

The PTA study then used data from thousands of employees at pension systems in Austin, Houston, and San Antonio, to calculate the costs of achieving the retirement benefit using both defined benefit and defined contribution administration. 

“For workers in the three Texas defined benefit plans studied, our analysis indicates that the cost of a defined contribution plan delivering the same level of retirement income ranges from being 39% to 44% higher than would the cost of a defined contribution plan,” said William B. Fornia, president of Pension Trustee Advisors, Inc., in a press release.