ABSTRACT
As many of the case studies in the previous chapter have demonstrated, defined benefit (DB) pension plans carry with them substantial risks to the plan sponsors. Because of these risks and other perceived drawbacks of DB plans, there has been an increase in calls for public pension reform, especially after the downturn in the stock market between 2000 and 2002, which led to a sharp increase in pension contributions for many plan sponsors and put heavy burden on the budgets of many state and local governments. Two types of public pension reforms have been called for, one incremental and the other more fundamental. An incremental reform calls for a decrease in pension benefit level for public employees so as to reduce the plan sponsor’s pension contribution level and pension liability in the future. Due to the constitutional and statutory protection of participants’ pension rights, as discussed in Chapter 4, such reform, if implemented, would not affect the benefit level of current employees, although it would create a new tier of reduced pension benefits for new employees.
