A recent article in Institutional Investor by Fran Hawthorne, "Claim s that 401(k)s Beat Defined Benefit Plans Stirs Controversy," analyzes the findings of an Employee Benefit Research Institute (EBRI) Issue Brief claiming that defined denefit (DB) plans do worse than defined contribution(DC) plans for all incomes.

Hawthorne’s critique points out the weaknesses of the EBRI study. These include the fact that the study includes only data on voluntary 401(k) plans, which have higher contribution rates than the more prevalent automatic enrollment plans, that it uses unrealistically high rates of return on stocks, and that it ignores the fact that employers contribute 'free money' toward DB plans, but do not need to contribute to DC plans.  

Hawthorne is thorough. However, she overlooks two significant problems. First, EBRI overstates the retirement plan coverage and participation rates for workers, especially following an unemployment spell; this is especially important in the aftermath of the Great Recession. Second, it uses an implausibly high growth rate of average hourly earnings. EBRI’s findings are partly a result of these skewed assumptions.

These concerns are spelled out in a Huffington Post Business blog, jointly written with SCEPA Research Economist Joelle Saad- Lessler. 

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