Nearly 50 years ago the New York State legislature authorized the Teachers Insurance Annuity Association -- now more commonly known as TIAA-CREF -- one of the first defined-contribution retirement plans in the country.
Since then, nearly three-quarters of the faculty at the State University of New York (SUNY) have chosen this plan over the state's defined-benefit pension plan. The Empire Center's new report, "Optimal Option," focuses on the difference between traditional defined-benefit pension plans and defined-contribution plans.
E.J. McMahon, the report's lead author notes, "while workers in a defined-contribution plan assume the market risk associated with funding their own retirements, they also gain the benefits of rapid vesting, portability to different employers and greater flexibility to shape financial plans in line with personal needs and preferences." Likewise, "from the employer's standpoint, defined-contribution plans have the advantage of being financially transparent and predictable, unlike defined-benefit pension plans."