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National Experts: "NH cant afford a Defined Contribution Plan"

National Experts to New Hampshire Legislature:

“New Hampshire Can’t Afford the Defined Contribution Plan”

Concord, NH – On Friday, January 27^th, the New Hampshire Retirement Security Coalition hosted a nearly two hour presentation by four well known experts on retirement security and pension issues. Diane Oakley, Ross Eisenbrey, Gerri Madrid-Davis, and Hank Kim each testified before the New Hampshire House Special Committee on Public Employee Pension Reform. Biographies for each speaker, as well as their written testimonies, are attached.

“Defined Contribution plans are costly to establish and maintain,” said Hank Kim Executive Director of the National Conference on Public Employee Retirement Systems (NCPERS). “In several cases, states have replaced Defined Contribution plans with Defined Benefit plans because of the inadequacy of plan benefits or increased costs.”

“According to the report by Gabriel Roeder Smith, contribution rates would actually be higher under the proposed Defined Contribution plan than the normal cost for new members in the current Defined Benefit plan,” said Ross Eisenbrey, Vice President, Economic Policy Institute. “The employer contribution rate would increase by roughly 4% due to an increase in the normal cost as well as the cost to amortize the unfunded liability.”

“AARP believes that New Hampshire’s public employees should continue to have access to defined benefit plans, which provide a predictable monthly retirement benefit to employees, operate in a low-fee environment, and offer professional management of retirement assets.” said Gerri Madrid-Davis, Director of Financial Security & Consumer Affairs in the office of State Advocacy & Strategy Integration, Government Affairs, AARP. “Defined benefit plans are also more efficient – that is, they cost less to achieve a particular level of retirement income than defined contribution plans and provide economic support to state and local communities.”

“The Defined Benefit plan provides the best bang for the retirement buck,” said Diane Oakley Executive Director of the National Institute on Retirement Security. “Under the model, the Defined Benefit plan provides the same retirement income at nearly half the cost - 46 % less than individual 401(k)-type Defined Contribution accounts.”

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