The distribution of investment risk in defined benefit pension plans

The "textbook" description is that members of defined benefit plans bear no investment risk, in sharp contrast to members of defined contribution plans. Three sources of empirical evidence are used to support the proposition that employees do bear at least some of the investment risk associated with pension fund performance. Poor fund performance leads to larger employer contributions to maintain the defined benefit obligation and this in turn leads to lower levels of other forms of compensation. It is concluded that risk-shifting does occur, in at least some plans, and that the textbook distinction is overstated.