Document Type



The purpose of this study is to compare three major types of employer sponsored retirement plans, Defined Benefit (DB), Defined Contribution (DC), and hybrid, and their impact on the employee. Employee careers are simulated to understand the employee’s advantages and disadvantages of each type of plan, especially in the state of an economic depression. The study uses actuarial assumptions and the simulation varies a number of quantities to better understand the impact of employee savings. The variables which are simulated at different levels are: service start age, retirement age, current compensation, salary increase rate, rate of return on market investments, mortality rates, and interest rate. The simulation shows that traditional defined benefit plans typically give employees a higher benefit than both defined contribution and hybrid plans. Additionally, defined benefit plans are not subject to the market risk of many of the other retirement plan types. Finally, typical employees change plans at least once during their career and this has a significant negative effect on their retirement benefits.