Montana uses defined benefit pension systems

2013-01-01T21:30:00Z 2013-01-03T06:42:10Z Montana uses defined benefit pension systemsMissoulian State Bureau
January 01, 2013 9:30 pm  • 

HELENA – Like many states, Montana state and local government employees and teachers have what’s known as a defined benefit (DB) pension systems.

Under a DB plan, employees and employers both contribute to the pension funds through employees’ working careers. The funds are invested and managed by the state Board of Investments.

It provides government retirees with guaranteed monthly pensions of a fixed amount. It uses a formula based on how many years they worked for the government and their highest annual salary, usually averaged over three years.

An advantage of DB plans is that the monthly pension amounts are guaranteed, regardless of how the pension investments might be performing at the time.

Another kind of pension fund is what’s known as a defined contribution (DC) plan, which is similar to the 401(k) plans common in the private sector.

Under these plans, the employer and employee each make contributions to the fund. Employees are responsible for choosing their own investment options.

Under the DC pension system, when workers retire, they receive that pool of money that they and their employers have contributed, plus any investment gains – or minus any investment losses – the fund has incurred.

In contrast to a DB pension, there is no guaranteed monthly pension available for retirees under a DC plan.

For some years, new employees in the Public Employees’ Retirement System have been able to choose if they want to be in the DB or a DC plan. At present, 11 percent are in a DC plan.

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(1) Comments

  1. hellgatenights
    Report Abuse
    hellgatenights - January 04, 2013 2:27 am
    Few things you left out here professor......

    First, under the DB plan, a teacher, who works 8 months of the year, can and do collect far more monies then they ever contributed,,,,,,this is a fact, and one of my relatives enjoys this every month when the check comes in. The 401 plan cannot do that of course. Same for a firefighter that retires at 48. Even though he may have never put out more than a grass fire, he will get a pension until he dies 30yrs later. So....WHO pays for the deficit?

    WHO pays for any bad investments the board makes? Like......oh........purchasing that worthless stock from the ashes of Montana Power.

    Answer is same as payers do!

    And why is this? Are public employees any different then private sector counterparts? Yes, indeed they are! They are far less productive, the are out schooled by private schools, and they call in sick more often.

    There should be NO pensions for any of them, just social security ans a DC plan.....these people are not "Public servants"........but volunteer scout leaders and Booster Clubs are.
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