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Tuesday, November 8, 2011

DB or Not DB: That is the question

One of the characteristics of a defined benefit (DB) pension such as the current UC plan is that - in contrast to defined contribution (DC) plans - it provides a strong incentive to retire for long-service employees. The two-tier version enacted by the Regents for new hires still preserves the DB format. For faculty renewal, this feature can be important. The governor's proposal for state and local pensions (including UC) would substitute a "hybrid" plan which is a mix of DB and DC. The more DC there is in a plan, the less you get the incentive to retire.

As the TV ad below from today's Modesto, CA election illustrates, not having an incentive to retire can be problematic for certain occupations:

Note: The TV ad and the Modesto election is featured in http://blogs.sacbee.com/the_state_worker/2011/11/modesto-police-union-ad-argues-against-later-retirement-age.html

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