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One can find numerous discussions of switching public pensions to a 401-like plan:

Reform has been the hot topic in the world of public employee retirement plans for years. Too often the conversation immediately turns to tossing out defined benefit pensions for government workers and replacing them with individual investment accounts like 401(k)s. Supporters of the 401(k) approach say these plans are a better fit for the modern worker; they are always fully funded; they give workers control over their own money; the public sector should follow the private sector's lead in eliminating pension plans.

I'm also seeing news of Texas trying to pass such a law but it didn't come into force yet:

Senate Bill 321 would enroll new state workers hired after Sept. 1, 2022 in a cash balance plan — similar to a common 401(k) retirement account — rather than the traditional defined benefit pension plan. The bill now heads to the Texas House for consideration.

Are there states that managed to move all (or a big chunk of) their state employees to a 401k-like plan? Or perhaps many states do and there's a ranking of states based on how many of their employees are in a 401k plan?

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Every U.S. state has a significant number of employees covered by defined benefit pension plans.

There is a good reason for this practice. If a state employee is covered by a state defined benefit pension plan, the state can opt out of the Social Security system for that employee (an option not available to private sector employers with defined benefit pension plans).

State defined benefit programs are invested in stocks and bonds and earn better returns than Social Security whose trust fund is invested in Treasury bonds. Therefore, if a state participates in a defined benefit pension plan, the employees who participate get more money back for each dollar that they put into the system than they would if they were part of the Social Security system and had a 401(k).

Historically, only defined benefit pension plans met the requirements to opt out of Social Security because those plans meet the goal of Social Security of providing workers with a guaranteed income in retirement even if the financial markets collapse (as they just had following the crash of 1929 and the Great Depression in response to which Social Security was invented). A 401(k) style defined contribution plan wouldn't meet that goal and thus wouldn't be an adequate substitute for Social Security.

Even if it is permissible to opt out of Social Security using a 401(k) type plan (I am not familiar enough with this development to know with certainty), the practical difficulties of transitioning from a defined benefit pension plan to a defined contribution plan like a 401(k) are profound and have both winners and losers, with the losers arguably having lost vested property rights in their former defined benefit pension plan. Therefore, inertia and property rights strongly discourage a transition.

This said, many states have defined contribution pension plans for short term employees who are unlikely to have enough years in the system to ever be eligible for the state's defined benefit pension plan payments upon retirement.

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  • "the employees who participate get more money back for each dollar that they put into the system than they would if they were part of the Social Security" - if the money is actually invested and yields good returns, sure. But in practice cities/states have insanely underfunded pension funds, with New Jersey being the most extreme example. So for a "defined" pension plan the backup plan is "ask the taxpayers". For a 401k-style plan no such backup is available. – JonathanReez Jun 16 at 22:11
  • @JonathanReez "Insanely underfunded" is a gross overstatement. Moreover, "underfunded" is evaluated relative to projected values, not relative to amount invested or relative to Social Security. The ROI is also helped because a fair number of people leave the system and don't get the full return. Also, the benefit in a state defined benefit plan is not really a promise in quite the same sense as a normal contract. It can be adjusted to reflect investment performance. – ohwilleke Jun 17 at 0:29

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