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Retirement Plans: A Comparison

Your ASRS Defined Benefit Plan Explained

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Retirement Plans: A Comparison

How does an ASRS pension compare to a retirement savings account such as a 401(k)? In technical terms, your ASRS pension plan is a 401(a) Defined Benefit plan, while a 401(k) is classified as a Defined Contribution plan. There are many differences between the two, as outlined on the table below.

One important note: whether it’s a 401(k) or some other style of retirement savings plan, the ASRS heavily advocates members have both! While your ASRS pension is guaranteed for life, there are no provisions for automatic increases, such as a cost-of-living increase. Your pension is designed to be one piece of your retirement finances, with personal savings and Social Security completing your retirement finances and helping to offset future rising costs. For more information, visit Supplement Your Retirement.

Your ASRS Plan

A 401(a) Defined Benefit Plan

Other Retirement Savings

Defined Contribution Plans
Examples: 401(k), 457(b), IRA
ParticipationMandatory
For all employees of ASRS employers who meet membership criteria.
Optional
Encouraged as a supplemental source of income in retirement.
Contribution AmountsASRS Determines
The ASRS sets a mandatory contribution rate for members each fiscal year.
Employee Chooses
The employee decides how much they wish to contribute.
Employer Contributions Mandatory
All ASRS employers pay contributions on behalf of their ASRS member employees.
Optional
Some employers match an employee’s contributions, up to a certain amount.
Investment Management ASRS Managed
Employee and employer contributions are pooled together, invested, and managed by the ASRS investment team.
Employee Managed
Employee decides how the funds are managed.
Retirement Benefit Amount Based on ASRS Formula
Pension benefits are calculated using number of service years, average final salary, and a graded multiplier, not determined by employee account balance.
Based on Account Balance
The benefit amount varies based solely on the performance of the selected investments.
Retirement Benefit Length Lifetime Benefit
Once eligible and you retire, your pension benefit is guaranteed for life, and will never be reduced.
Based on Account Balance
Employee must manage withdrawal amounts to ensure the funds last as long as they are needed.
Loans or Withdrawal Not Permitted
Loans or withdrawals are not permitted from an active member’s account due to IRS regulations.
Permitted
Loans or withdrawals are typically permitted, and subject to an IRS penalty if prior to 59 1/2 years old.
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