The following was a study commissioned by the Minnesota State Legislature and conducted by Mercer Consultants about the cost of converting future state employees in Minnesota to a Defined Contribution Plan.
Switching Minnesota's current public employee pension plans to defined contribution or hybrid plans would not come without significant costs attached. That's one of the findings in a draft study released by the state's three statewide public pension plans Friday, April 1.
from the existing DB to a DC for new hires. Costs increase during a transition period because once a plan is closed to new members any unfunded liabilities remaining in the existing DB plan must be paid off over a shorter timeframe.
“We ask that legislators and other interested individuals take the time to analyze the many issues involved in any significant alterations to our existing retirement system,” said Laurie Hacking, TRA’s executive director. “ First, there are significant additional costs involved in switching from our current defined benefit plans to defined contribution or hybrid plans – over $1 billion in the first 10 years in the case of TRA. There would be no overnight savings. Only after 12 years might overall costs decline."
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