As always, NYT’s Room for Debate offers wonderful grist for debate. I take my cues on pension issues from Josh Barro, who has just written a terrific comprehensive piece on the subject for National Affairs:

[S]erious pension-reform plans should abandon the defined-benefit model. Three states—Michigan, Alaska, and Utah—have enacted reforms that will move many employees to defined-contribution retirement plans, or at least to sharply modified defined-benefit plans that shift most investment risk away from taxpayers. In most states, however, pension reform has been a matter of tinkering: increasing employee contributions, adjusting benefit formulas, raising retirement ages, and so on.
The problem with tinkering is that it addresses only the matter of pensions’ high costs, doing nothing to shield taxpayers from the investment risks discussed above. Moreover, if states don’t seize this moment to do away with defined-benefit models once and for all, they are unlikely to have another chance any time soon. And those small fixes that they do enact will likely be undone in future years. Administrations change, legislative seats turn over, and public-employee unions wax and wane in their power. Given a few years of strong stock-market returns and friendly lawmakers, public-worker interests will likely be able to restore any benefits they lose during the current reform cycle—which will put state finances, and the taxpayers affected by them, in the same tough position during the next downturn.

One reason the political conflict will continue to very sharp, however, is that, as Chad Adelman notes, 401(k) plans have had lackluster performance in recent years.

In other words, the vast majority of workers are going to be working more years, trying to find part-time jobs, and relying more heavily on their Social Security benefits. This is important context for the debate over public-worker retirement benefits, and it should be a cautionary tale to anyone who thinks 401k-style investment plans are the solution to our country’s impending retirement crisis.

I tend to think that we’re all better off when older Americans remain attached to the workforce for a longer period of time, as it tends to extend healthy lifespan. My main concern is encouraging economic growth. Employers are often reluctant to hire older workers, but the skill endowments of older U.S. workers relative to younger workers will change that in coming years, I suspect.