For example, the nation's biggest 401(k) administrator recently reported that the average account balance essentially remained unchanged in 2011, despite a rise in both employee and employer contributions. While workers contributed on average more than 8 percent of their annual pay in 2011, poor investment performance, large administrative fees and a volatile stock market left many investors with few extra earnings. According to The Boston Globe, workers with 401(k)s have had to rely mostly on contributions from themselves and their employers to build savings, rather than investment gains.


This is bad news for proponents of drastic public pension overhauls who have proposed getting rid of defined benefit plans in favor of 401(k)s.

Findings released this month by the Center for American Progress showed that switching to 401(k) style plans from traditional pension plans can actually deepen state budget deficits and cost nearly twice as much to provide the same level of retirement benefit to workers.

It is also unsettling for employees in the private sector who have seen their traditional defined benefit plans traded for less reliable defined contribution plans like 401(k)s. The UC Berkeley Center for Labor Research reported last year that, "as recently as 25 years ago, 80% of large and medium sized firms offered a defined benefit pension plan; today, less than a third do, and the share continues to fall." The expansion of 401(k) accounts in the private sector has shifted much of the financial risk back onto employees and their families, creating greater retirement insecurity for today's workers.


It's clear that switching away from traditional pensions to 401(k)s won't benefit public employees, employers or taxpayers, and that based on the above reports, the most reliable and cost-effective way to provide retirement security for public servants such as nurses, firefighters and teachers is through moderate reforms to our current traditional pension plans.