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Alternatives to Traditional Defined Benefit Plans

Information Brief

Our Office issued performance audits and sunset reviews of the Arizona State Retirement System (ASRS) (see Report No. 15-106), and the Public Safety Personnel Retirement System (System) (see Report No. 15-111). In these reports, we assessed efforts by the ASRS, the System, and the Legislature to ensure the sustainability of the State’s four defined benefit (pension) plans that provide a guaranteed lifetime retirement benefit to public employees. We also conducted research on alternative retirement plans that do not generally guarantee lifetime benefits. This information brief covers common types of alternative retirement plans implemented by other states (defined contribution, hybrid, and cash balance plans), alternative retirement plans implemented in Arizona, and the advantages and disadvantages of these alternatives. We also provide a summary of recommendations regarding these alternatives from the 2012 report of the Defined Contribution and Retirement Study Committee, which was established in 2011 to examine Arizona’s pension systems.