General Electric recently announced that it is freezing its pension plan for about 20,000 of its employees, meaning they will not accrue any new benefits beyond what they have already earned. The company made this move because it is struggling with $27 billion in pension and post-employment benefits liabilities. The change is expected to reduce GE’s pension liabilities by $8 billion.
 

The GE announcement is a wake-up call for Maryland, a state that likewise is struggling to cover $20 billion in unfunded public pension liabilities.
 

GE’s move highlights the gradual extinction of traditionally defined benefit pensions in America’s private sector. Defined benefit plans, which promise specific pension payments upon retirement, are becoming increasingly costly and risky for employers. Only 16 companies in the Fortune 500 offered DB plans to new hires in 2017, down from 238 in 1998. GE previously closed defined benefit pensions for new hires in 2012.
 

Given this, why do public sector employers, like Maryland, still promise employees defined benefit pension plans?
 

Unlike companies that face enormous pressure to deliver positive quarterly earnings and reduce general liabilities, Maryland’s public pension system receives little public scrutiny. Federal law does not require Maryland and other governments to adequately fund their pension plans. Therefore, instead of funding these benefits while employees are still working, the state can indefinitely push pension liabilities into the future for the next generation of taxpayers to deal with.
 

That has allowed Maryland and other states to continue offering traditionally defined benefit pension plans to its state employees, regardless of how grim the system’s health may be.
 

Maryland offers costly, defined benefit plans as a way to attract employees. Unfortunately, pension benefits, which take decades to fully accrue, are becoming less and less compatible with American workers, who tend to switch jobs often. Over 50% of Maryland state employees work for the state for less than 10 years.
 

Meanwhile, defined benefit plans are very expensive and risky for employers. With defined benefit plans, the state must overcome poor market returns for its invested pension money and contend with the increasingly long-lived retirees.
 

Maryland should look for ways to move new state employees from defined benefit plans to defined contribution plans. In a defined contribution plan, employees and employers make contributions to an individual retirement account. Employee contributions are set as a percentage of employee salary, and the state usually matches the contributions. Since the final payouts are not “defined,” market fluctuations do not affect the state’s burden.
 

Defined contribution plans are more portable than defined benefit plans, and can better accommodate the needs of Maryland’s transient workforce. Since all benefits accumulate in an employee’s personal account, workers can easily roll over the account into another defined contribution plan without forfeiting any accumulation.
 

Defined contribution plans give retirees more control over their retirement, as the employees are responsible for investing their own retirement savings. In contrast, employees under defined benefit plans must depend on the state to manage their retirement fund properly — something Maryland has struggled to do. The state has lost over $5 billion during the past decade because of questionable investment strategies and enormous fees.
 

Switching to defined contribution would help prevent Maryland’s pension liabilities from further ballooning out of control, as defined contribution plans are, by definition, fully funded. That said, the opposition from the public sector labor unions and the labor-friendly legislature are some tough obstacles to overcome in order to pass sensible pension reforms in Maryland.
 

GE’s decision to freeze its pension plan for about 20,000 of its employees was a difficult but necessary move to show its stockholders that the struggling company is willing to pull all levers to restore its financial health. Maryland government has the same responsibility to show the state’s taxpayers its willingness to end the public pension crisis by pushing for pension reforms, even if they are politically challenging.

Carol Park is a senior policy analyst at the Maryland Public Policy Institute.