Pension talking points support public-sector DB plans.

• Position: News & Numbers - Defined benefit

The funded status of public employee defined benefit (DB) retirement plans is still a popular media topic. Because DB plans are the primary vehicle for ensuring retirement income security for public workers, and these plans are viable and necessary, the Callan Investments Institute issued Saving Public Defined Benefit Plans, a collection of talking points intended to move the discussion forward around the importance of DB plans. In the paper, Callan expands on each point and supports its assertions with research, data, and actuarial considerations.

The points include the following:

* DB plans serve many purposes beyond providing constituents with retirement income.

* DB plans have proven to be extremely cost effective and reliable in delivering basic retirement income security--when the rules of DB finance are followed.

* Many public DB plans are underfunded today, but not because of paltry long-term returns. It is primarily because plan sponsors' contributions were neither sufficient nor consistent enough to properly fund the benefits promised.

* New benefits cannot be funded out of better-than-average investment returns simply because average returns is all one can expect over the life of the plan.

* DB plan funding surpluses and deficits occur as part of the normal cycle of investment market returns.

* Plans that implement an actuarially sound funding policy will achieve 100 percent funded status over the long...