There’s an important financial opportunity unfolding right now for University of Missouri employees — one that could have a lasting impact on your retirement.
The University has approved a Defined Contribution (DC) Plan Opt-In Program, giving certain employees a one-time chance to move from their current pension or hybrid plan into the new DC plan introduced on October 1, 2019.
This decision isn’t one-size-fits-all — and that’s where we can help. Before you decide whether to opt in, it’s worth understanding exactly how each plan works and what the tradeoffs may be.
Understanding the Three Plans
Defined Benefit (Pension) Plan
For employees hired on or before October 1, 2012, the traditional pension plan offers a guaranteed income stream for life.
Your benefit is calculated as:
Years of Service × Highest 5 Consecutive Years of Salary × 2.2%
This formula provides a lifetime income, though options such as survivor benefits, lump-sum payouts, or cost-of-living adjustments (COLAs) may reduce the monthly amount.
Hybrid Plan
Employees hired between October 1, 2012 and October 1, 2019 are in the Hybrid plan, which combines a smaller pension with a matching retirement contribution.
The pension uses a 1% multiplier, but employees who contribute at least 3% to a 403(b) or 457 plan receive a 5% University match.
Defined Contribution (DC) Plan
Employees hired on or after October 1, 2019 are in the DC plan.
It doesn’t include a pension, but employees who contribute 8% to their 403(b) or 457 plan receive a dollar-for-dollar 8% match — for a total of 16% of salary being invested toward retirement.
Highlights of Each Plan
- Defined Benefit (Pension):
- Guaranteed lifetime income that can’t be outlived.
- Valuable for long-term University employees planning to retire there.
- Hybrid Plan:
- Combines pension income with matching contributions.
- Offers flexibility and supplemental savings potential.
- Defined Contribution (DC) Plan:
- Highly competitive 8% match when contributing 8%.
- Greater flexibility for career changes or early retirement.
- Full control over investment strategy and timing.
Drawbacks to Consider
- Pension (Defined Benefit):
- Works best if you stay with the University for your full career.
- Limited value if you leave after only 10–15 years.
- Survivor benefits and COLAs reduce the monthly benefit.
- Hybrid Plan:
- A middle ground that doesn’t maximize either side.
- Smaller pension and lower match compared to the DC plan.
- Defined Contribution (DC):
- No guaranteed lifetime income.
- Investment performance and retirement outcomes depend on your own savings and decisions.
How to Evaluate the Opt-In Decision
If you’re eligible to move from the pension or hybrid plan into the DC plan, your first step is to understand the numbers.
Here’s what to review:
- Get a pension estimate —
- Married employees: request an estimate with a 100% survivor benefit and cost-of-living adjustments.
- Unmarried employees: request a single-life benefit with cost-of-living adjustments.
- Estimate your potential DC plan growth —
If you save 8% and receive the 8% match, what could that amount grow to by retirement?
A conservative expected annual return of 6–8% may be reasonable for projections. - Compare the income potential —
The key question: Can your DC plan balance produce an income similar to the pension you’d be giving up?
This comparison requires careful analysis — and that’s where working with a financial advisor can make a real difference.
How Aligned Wealth Group Can Help
At Aligned Wealth Group, we’ve spent more than 20 years helping clients across mid-Missouri navigate complex pension and retirement decisions.
To make this process easier, we created the Pension Lump Sum Analysis Navigator (P.L.A.N.) Tool — a streamlined way to evaluate your options using your real numbers.
With just a few details and some guided questions, we can:
- Project your potential outcomes under each plan.
- Help you understand the tradeoffs clearly.
- Provide guidance so you can make an informed, confident decision.
We’re not making blanket recommendations — this decision is unique to every person. But we are here to help you make the most informed choice possible.
Ready to Explore Your Options?
If you’d like personalized help understanding the University’s Opt-In Program and whether it’s right for you, we invite you to schedule a free consultation.