Category Archives: Pensions

Physical Job Demand and Early Retirement

Source: Sepideh Modrek, Mark Cullen, Working paper, presented at 4th Annual Joint Conference of the Retirement Research Consortium, August 2-3, 2012

In this study we explore whether higher physical job demand predicts earlier (normal) retirement once we account for health and wealth. We then examine whether the timing of pension eligibility, which is determined by tenure and age, is more important in inducing retirement for those with more physically demanding jobs. Finally, we examine whether pension payouts or wealth accumulation induces retirement differentially for those with more physically demanding jobs….. Our study relies on an extraordinarily rich administrative data source from a large multi-site aluminum-manufacturing employer, Alcoa. …Those in the lowest demand jobs are estimated to work 16% longer relative to those in the medium demand, and those in high demand jobs retire 17% earlier relative to the medium demand group. We also find that that recent injury history is associated with earlier retirement. Finally, while we find evidence of a strong ‘pull’ effect of pension eligibility, pension payouts and 401K-wealth accumulation, there is limited evidence of a difference by job demand, though we find that those in physically demanding jobs who participate in the 401K schemes retire earlier.
Hard Labor Spells Earlier Retirement
Source: Boston College, Center for Retirement Research, Financial Security Project, Squared Away Blog, August 14, 2012

End of Retirement

Source: Donald L. Barlett and James B. Steele, Investigative Reporting Workshop, August 12, 2012

Pensions were once an integral part of the American dream, a pledge by corporations to their employees: For your decades of work, you can count on retirement benefits. Not everyone had a pension, but from the 1950s to the 1980s, the number of workers who did rose steadily — until 1985. Since then, more and more companies have walked away from pensions. Before today’s workers reach retirement age, decisions by Congress favoring moneyed interests will drive millions of older Americans — most of them women — into poverty and push millions more to the brink.

2011 Annual Survey of Public Pensions: State-Administered Defined Benefit Data

Source: U.S. Census Bureau, August 9, 2012

From the press release:
The nation’s state-administered defined benefit retirement systems totaled $2.5 trillion in cash and investment holdings in 2011, a 14.6 percent increase from $2.2 trillion in 2010, according to new statistics from the U.S. Census Bureau. Earnings on investments were $410.6 billion, up from $291.1 billion in 2010. These statistics come from the 2011 Annual Survey of Public Pensions: State-Administered Defined Benefit Data, which provides an annual look at the financial activity and membership information for the nation’s 222 state-administered public-employee retirement systems, including revenues, expenditures, investment holdings, membership and beneficiaries. Statistics are shown for the nation and individual states. This information includes actuarial liability statistics, which project the total obligation required to cover costs for providing pensions to former and present employees.

See also:
Summary Report
Source: Erika Becker-Medina, U.S. Census Bureau, G11-ASPP-ST, August 2012

When a Promise Isn't a Promise: Public Employers' Ability to Alter Pension Plans of Retired Employees

Source: Gavin Reinke, Vanderbilt Law Review, Vol. 64 no. 5, 2011

This Note analyzes the permissibility, under the U.S. Constitution, of public employee pension reforms that alter the amount of benefits to which retired employees are entitled, and proposes a solution to ensure the continued solvency of state public employee pension funds. Part II examines the underlying causes of the current pension crisis. Part III discusses current state attempts to reduce the pension benefits of retired public employees and explains the legal challenges to these reforms that are currently pending in state courts. Part IV analyzes the legal claims in more detail and explores whether pension reforms that reduce benefits for retired public employees violate substantive due process, the Takings Clause, or the Contracts Clause of the U.S. Constitution. Part V proposes that Congress encourage states to enact minimum funding requirements, similar to those in the Employee Retirement Income Security Act of 1974 (“ERISA”) that govern private employee pensions, by allowing states that choose to adopt such requirements to issue tax-exempt bonds for the purpose of funding public employee pensions.

Legal Constraints on Changes in State and Local Pensions

Source: Alicia H. Munnell and Laura Quinby, Center for Retirement Research at Boston College, Issue Brief, State and Local Pension Plans, SLP#25, August 2012

From the summary:
The brief’s key findings are:
– In responding to pension shortfalls, most states are legally constrained from reducing future benefits for current workers.
– These constraints make it difficult to adjust to changing conditions and to share the burdens of reform fairly between new and current participants.
– The legal boundaries for pension benefits are typically defined under a contracts-based approach rather than a constitutional provision.
– Narrowing the contract definition to when the worker performs the service would still protect benefits earned to date, while allowing adjustments to future benefits.

State Pension Systems on the Rebound

Source: Jennifer Burnett, Capitol Ideas, Vol. 55 no. 4, July/August 2012

Things are starting to look up for state pension systems…. Economic conditions in general have been improving, especially on Wall Street, which is closely tied to the financial health of public retirement systems. Corporate stocks and bonds make up more than half of all cash and investment holdings for state and local public employee retirement systems.
But the improved health of pensions isn’t just because investment markets are on the rebound; states have taken decisive action that also has helped the ailing systems…. Those reforms include higher employee contributions, a higher age or more years of service to qualify for retirement, and reductions in cost-of-living adjustments, or COLAs, for future or existing public employees….

Retirement Security for Americans and the Role of Defined-Benefit Pension Plans

Source: Thomas P. DiNapoli, Public Administration Review, Vol. 72 no. 4, July/August 2012
(subscription required)

…While I believe that it is appropriate to have a discussion about ways to reduce costs, I believe that a move toward widespread availability of a 401(k)-style plan for public employees is shortsighted. Let’s look at the numbers in perspective: pension contributions from state and local governments nationwide amount to 3.8 percent of their spending, on average. In New York, the number is 2.4 percent of state operating funds. The truth is that most state pension funds are sustainable in the long term. Most of the significant underfunding of state and local plans in recent years has resulted from shortsighted practices of sponsoring governments for budget relief in bad times or spending more in other areas in good times…..

Where Have All the Good Jobs Gone?

Source: John Schmitt and Janelle Jones, Center for Economic and Policy Research, July 2012

From the summary:
The U.S. workforce is substantially older and better-educated than it was at the end of the 1970s. The typical worker in 2010 was seven years older than in 1979. In 2010, over one-third of US workers had a four-year college degree or more, up from just one-fifth in 1979. Given that older and better-educated workers generally receive higher pay and better benefits, we would have expected the share of “good jobs” in the economy to have increased in line with improvements in the quality of workforce. Instead, the share of “good jobs” in the U.S. economy has actually fallen. The estimates in this paper, which control for increases in age and education of the population, suggest that relative to 1979 the economy has lost about one-third (28 to 38 percent) of its capacity to generate good jobs. The data show only minor differences between 2007, before the Great Recession began, and 2010, the low point for the labor market. The deterioration in the economy’s ability to generate good jobs reflects long-run changes in the U.S. economy, not short-run factors related to the recession or recent economic policy….

…The standard explanation for the deterioration in the economy’s ability to create good jobs is that most workers’ skills have not kept up with the rapid pace of technological change. But, if technological change were behind the decline in good jobs, then we would expect that a higher – probably substantially higher – share of workers with a four-year college degree or more would have good jobs today. Instead, at every age level, workers with four years or more of college are actually less likely to have a good job now than three decades ago. This development is even more surprising because the economy also has almost twice as many workers with advanced degrees today as it did in 1979.

We believe, instead, that the decline in the economy’s ability to create good jobs is related to a deterioration in the bargaining power of workers, especially those at the middle and the bottom of the income scale….
See also:
A Closer Look at Good Jobs By Education Level
Source: John Schmitt, Center for Economic and Policy Research, CEPR blog, August 8, 2012
Does This Job Come With a Retirement Plan?
Source: Janelle Jones, Center for Economic and Policy Research, CEPR blog, August 2, 2012

The Pension Factor 2012: The Role of Pensions in Reducing Elder Economic Hardships

Source: Frank Porell and Diane Oakley, National Institute on Retirement Security, July 2012

From the summary:
A new study calculates the impact of pensions for reducing the risk of elder American poverty and hardship, particularly for households headed by women and racial/ethnic minority groups.

The study finds that rates of poverty among older households lacking defined benefit (DB) pension income were approximately nine times greater than the rates among older households with DB pension income in 2010, up from six times greater in 2006 a new study calculates. Older households with lifetime pension income are far less likely to experience food, shelter, and health care hardship, and less reliant on public assistance. The data also indicate that pensions are a factor in preventing middle class Americans from slipping into poverty during retirement.

The report estimates that in 2010, DB pension receipt among older American households was associated with:

– 4.7 million fewer poor and near-poor households
– 460,000 fewer households that experienced a food insecurity hardship
– 500,000 fewer households that experienced a shelter
– 510,000 fewer households that experienced a health care
– 1.22 million fewer households receiving means-tested public assistance

See also:
Press Release
Fact Sheet
Webinar Replay