It looks like the cost of retirement is even becoming too much for the government. Total assets in defined contribution plans for public sector employers increased almost 10% over 2006, Bob Wuelfing, president of RG Wuelfing & Associates and the SPARK Institute, told attendees Monday at the group's 2008 conference.

"We expect in the next five to seven years that the growth in the public sector will outpace the growth in the private sector by 2% to 3% per year," he added.

More state and local governments are implementing or will be implementing DC alternatives in an attempt to offset their escalating costs associated with retiree benefits, says Wuelfing.

Research by the SPARK Institute, which represents the interests of the retirement services industry, shows that the DC market holds $4.9 billion in assets, with 87% originating from the private sector and 13% from the public sector.

In the public sector, which holds $660 billion in DC assets, 40% of those are in 401(a) plans, 35% in federal employee thrift plans and 25% in 457 plans.

Wuelfing further explained that the future of public pensions rests on two key issues: benefits must be adequate and secure, and employer funding must be sufficient in the long term and manageable in the short term.

Yet, meeting this on a continuous basis may require state and local governments to move away from defined benefit plans, he added.