Defined-benefit (DB) plans offer distinct advantages over defined-contribution (DC) plans, and employers should carefully examine any claims that dispute that, according to new research from the National Institute on Retirement Security.
"This study finds that due to the effects of longevity risk pooling, maintenance of portfolio diversification, and greater investment returns over the lifecycle, a DB plan can provide the same level of retirement benefits at about 27 percent lower cost than an ideal DC plan and about 49 percent lower cost than an individually directed DC plan," William B. Fornia, president of Pension Trustee Advisors and Dan Doonan, the executive director of the National Institute on Retirement Security, wrote in a research paper.
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