Defined Benefit vs. Defined Contribution Plans

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IPERS is committed to helping our members make sense of retirement planning. The chart below helps sort out the differences between IPERS (a defined benefit pension plan) and defined contribution retirement funds - most common are 401(k) and 403(b) plans.

If your employer allows you to choose between IPERS and a defined contribution plan, use this tool to determine the best choice for you. IPERS retirement benefit counselors also available to help you understand your options.

(Defined Benefit Pension Plan)
401(k)s, 403(b)s, and Others 
(Defined Contribution Plans)
Guaranteed BenefitYES. Your benefit is guaranteed for life, no matter how long you live and no matter how the investments perform.NO. Your benefit fluctuates depending on the amount in your account and how your investments perform.
Monthly BenefitSTABLE. Your benefit amount is determined by a formula based on years of service and your average salary. Once determined, your amount will not change.UNPREDICTABLE. Your benefit is based on your contributions, any employer contributions and any investment earnings or losses (minus any withdrawals or loans received).
Investment RiskIPERS takes on all the investment risk. Your benefit amount is not affected by stock market fluctuations. YOU take on all the investment risk. You are responsible for investment decisions and monitoring.
Vesting100% in your contributions. Once you become vested, you gain access to a greater percentage of your employer's contributions with each year you contribute to IPERS. If you are a regular member, you become vested after seven years of service, or when you reach age 65 while in IPERS-covered employment. If you are a Special Service member, you become vested after four years of service or have wages reported during the month you turn 55. (See the Vested Members page for more information.)100% in your contributions. Vesting in your employer's contributions varies by the employer (plan sponsor). For example, some plans allow a gradually increasing percentage of vesting for several years before you reach 100%.
Withdrawals & LoansNOT AVAILABLE. Your IPERS funds are not available to withdraw or borrow against. Only when you leave covered employment may you withdraw your money. This is an important difference between IPERS and defined contribution plans.  TYPICALLY AVAILABLE. Most defined contribution plans allow for withdrawals and loans. However, withdrawals and loans will significantly reduce future benefits that will be needed in retirement. 
PortabilityYES. If you leave IPERS-covered employment, you can roll over your money to another qualified retirement plan, take a refund or leave it with IPERS until a later date. YES. Your vested funds may be rolled over to another qualified retirement plan.
Death BenefitsYES. IPERS provides pre and postretirement death benefits. Beneficiaries can roll over IPERS death benefits to qualified retirement plans. YES. Your account balance will transfer to your beneficiary(ies) when you die. 
Disability BenefitsYES. IPERS provides disability benefits if you meet certain qualifications. NO. Defined contribution plans do not usually provide disability benefits.
Fees & ExpensesINCLUDED. All fees and expenses are paid by the IPERS Trust Fund and do no affect the amount of your benefit payment.TYPICALLY HIGH. All fees and expenses are distributed across accounts or taken directly from individual balances.
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