Old style defined-benefit pensions get better investment returns than defined-contribution retirement plans such as 401(k)s. That’s been established in survey after survey. I cited it as fact in a column about state and local government pensions last week.
But what if this particular fact is out of date? That’s the argument that Josh B. McGee makes in a really interesting paper. McGee is a senior fellow at the conservative Manhattan Institute and a vice president at the Laura and John Arnold Foundation, which has been advising state and local governments on pension reform -- and in many cases pushing them toward 401(k)-style plans. In his paper, he presents evidence that defined-contribution plan assets are being invested a lot more efficiently and responsibly than they used to be, and have wiped out pensions' performance edge.
