Auto-Triggers: Exploring Their Potential in the Public Pension Ecosystem
Can risk-sharing plans strengthen public pensions while protecting benefits?
Defined-benefit pensions remain the gold standard for retirement security, delivering twice the benefits of 401(k)-style plans at the same cost. Yet pressure continues to shift public employees toward individual defined-contribution accounts.
This 2019 NCPERS Research Series report explores a promising middle path: collective defined-contribution (CDC) plans that use automatic triggers to adjust contributions and benefits based on market performance.
What You'll Learn
- Real-world Collective Defined-Contribution plan examples from the Netherlands, New Brunswick, Wisconsin, and Maine show how auto-triggers work in practice.
- Key design features including funding thresholds, contribution caps, benefit adjustments, and recovery mechanisms that activate automatically.
- Critical success factors like stakeholder communication, governance structure, and the balance between benefit security and cost predictability.
- Honest assessment of both advantages and potential drawbacks, including concerns about benefit reductions and implementation challenges.
Why It Matters
As state and local governments face fiscal pressures, understanding alternative plan designs becomes crucial. CDC plans offer a way to pool risk and maintain professional investment management while building in automatic stabilizers.
But they're not a panacea. The research examines whether these plans truly protect retirement security or simply shift risks to employees through a different mechanism.
Read the full analysis to understand how auto-triggers could fit into America's public pension landscape.