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 in the table below.
One important note: The ASRS heavily advocates members having a supplemental retirement account separate from their ASRS benefit as an effective way to help provide for a more secure retirement. You can review which additional savings plans are available to you on our Supplement Your Retirement page.
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.
Your ASRS PlanA 401(a) Defined Benefit Plan | Other Retirement SavingsDefined Contribution PlansExamples: 401(k), 457(b), IRA | |
| Participation | Mandatory For all employees of ASRS employers who meet membership criteria. | Optional Encouraged as a supplemental source of income in retirement. |
| Contribution Amounts | ASRS 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 The ASRS does not permit members to take loans from their account because it is not authorized in state statute. Absent authorizing legislation, the ASRS cannot permit members to borrow from their account. | Permitted Loans or withdrawals are typically permitted, and subject to an IRS penalty if prior to 59 1/2 years old. |
