The National Institute on Retirement Security has challenged thevalidity of a study released by the Manhattan Institute, calling it“so fundamentally flawed that it is irrelevant.”

According to NIRS, the Manhattan Institute study, “DefinedContribution Plans are Cost-Effective,” authored by Josh McGee, asenior fellow at the Institute, erred in the data it used to arriveat its conclusions.

In evaluating public sector pension plans, NIRSsaid, the study relied on private sector pension data, rather thanpublic sector data, to do so—and this invalidated its findings.“Also troubling is that the study’s title is not supported by anynumbers in the report to demonstrate the cost-efficiency of adefined contribution plan,” said Diane Oakley, NIRS executivedirector, in a statement.

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In addition, said NIRS, the new study “inaccurately” criticizesone of its own, “Still a Better Bang for the Buck: Update on theEconomic Efficiencies of Pension Plans,” which NIRS says “remains... credible and accurate”; was “conducted by a respected pensionactuary with both public and private sector experience”; is “basedon empirical research on investment behaviors of individuals” and“was carefully reviewed by a committee of experts.”

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Among the challenges NIRS makes to the Manhattan Institute studyare these:

• Claims that defined benefit plans are not structurally morecost-effective than DC plans are not borne out, according to NIRS,because “data and empirical evidence” indicate that a DB plan canprovide “a target retirement benefit at half the cost of a DCaccount.”

• Claims that the investment returns in DC plans are similar tothose in DB plans are not supported by the data. NIRS said that theManhattan Institute study did not use public pension data and alsodid not consider asset allocation shifts in private-sector pensionsdue to “frozen” pensions.

• Stating that DC plans can offer annuities, without taking intoaccount either the few DC plans that do so or the higher costspresented by DC plan annuities—or the need to buy the annuities“from the DB plan.”