The Golden Goose in the Crosshairs: The Transition to Defined Contribution Pension Plans in the Public Sector: Unintended Consequences

Abstract

State, county, and local governments are currently facing a myriad of economic issues, based on shrinking tax revenues combined with increased expenditures. Of these, the costs related to defined benefit pension plans are one of the most serious issues facing many public employers. Through a comprehensive review of the existing literature, this article examines how the shift from the defined benefit (DB) to defined contribution (DC) pension plan has the potential to enhance levels of labor unrest due to changes in union militancy, bargaining skills deficits, intra-organizational conflict, and issues related to economic trade-offs. Besides the capacity for immediate and deleterious ramifications in the collective bargaining process, the transition to the DC pension also presents some potentially negative consequences related to human resource management, including changes in the psychological contract, recruitment strategies, employee turnover, and changes in retirement patterns. Recommendations to improve labor relations and human resource management practices in the DC pension environment are also explored.

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