The shifting pension landscape raises questions about the financial security of future retirees. About one-half of private-sector workers are not covered by employer-sponsored pension plans on their current job. Many private-sector employers have replaced traditional pensions with 401(k)-type plans, which protect benefits for workers who change jobs frequently but expose participants to investment risks. This primer describes pensions, workers with coverage, and related policy issues.
Source: Pew Center for the States
States have promised at least $2.73 trillion in pension, health care and other retirement benefits for public employees over the next three decades, according to a report released today by The Pew Charitable Trusts’ Center on the States. Promises with a Price, the first 50-state analysis of its kind, finds that states have saved enough to cover about 85 percent of their long-term pension costs, but only 3 percent of the funds needed for promised retiree health care and other non-pension benefits. All told, states already have set aside about $2 trillion to meet their long-term obligations. But they still need to come up with about $731 billion–a conservative figure that does not include all costs for teachers and local government employees.
Full Report (PDF; 1.1 MB)
Individual state fact sheets (PDFs)
Source: Labor Studies Journal, December 2007
By Johanna Weststar and Anil Verma
This article examines the efficacy of labor representation on pension boards. Using existing literature and interviews with labor trustees, this article develops a model where a more formal approach to recruitment and selection, skill acquisition, and accountability is hypothesized to aid labor trustees in achieving effective integration and representation on pension boards. Data indicate that labor trustees are placed in a challenging environment with insufficient support from their union, other trustees, or the board. These findings have important implications for the selection, training, and integration of labor trustees and the success of a labor agenda on pension issues.
Source: U.S. Government Accountability Office
There are no easy answers to the difficulties of equalizing Social Security’s treatment of covered workers and noncovered public employees. About one-fourth of public employees primarily state and local government workers are not covered by Social Security and do not pay Social Security taxes on their government earnings. Nevertheless, these workers may still be eligible for Social Security benefits through their spouses’ or their own earnings from other covered employment. To address concerns with how noncovered workers are treated compared with covered workers, Social Security has provisions in place to take noncovered employment into account and reduce Social Security benefits for public employees.
Source: Ronald K. Snell, National Conference of State Legislatures, October 2007
This report summarizes selected pensions and retirement legislation that state legislatures enacted in 2007, some 2006 legislation not reported last year, and a few items of particular interest that failed to pass or were vetoed. Bills summarized below have been enacted into law unless there is a specific indication to the contrary. Not all legislation had been chaptered at the time this report was compiled. Some legislatures remain in session at the time of publication, October 2007.
From IWS Documented News Service
No one knows much about how public pension funds are governed or who’s governing them. It’s about time we did.
Even governments that don’t have dramatically underfunded pension plans are facing unprecedented problems in paying for their liabilities, largely as a result of prior years’ decisions to put off actuarially required contributions and a more recent phenomenon: the growth in the number of retirees.
Source: James Poterba, Steven Venti, David A. Wise, NBER Working Paper No. 13381, September 2007
The pension landscape in the U.S. has changed dramatically over the past 25 years. Saving through personal retirement accounts has become the principal form of retirement saving. We document the transition from a defined benefit system to a personal account system and show the effect it has had on wealth at retirement. We summarize results from other research we have done to project the growth of retirement assets over the next three decades. Our projections suggest that the advent of personal account saving will increase wealth at retirement for future retirees across the lifetime earnings spectrum.
From the summary:
Pension plan sponsors in the US have had time to consider the effects of the recent pension reform legislation on their DB plans. This article examines whether they like what they are seeing, and whether a trend is emerging for dealing with the consequences of these new laws.
From the summary:
This paper examines many of the sometimes-controversial issues raised in discussions regarding the design and funding of retirement plans for public employees. However, it does so in a different way. By focusing on development of appropriate benefits and funding policies and the use of risk management principles, we hope to provide public sector policy makers a better way to develop sound and sustainable retirement benefit policies for state and local governments and their employees based on our organization’s nearly 90 years of experience providing retirement security to individuals working in the non-profit sector.
Source: Watson Wyatt, July 23, 2007
From the press release:
The rate of pension plan freezes among FORTUNE 1000 firms has slowed, and the majority of companies with defined benefit plans are committed to keeping them. These are the findings of two new studies by Watson Wyatt Worldwide, a leading global consulting firm. An analysis of pension plan sponsorship among FORTUNE 1000 companies shows that the share of plan sponsors freezing their plans dropped from 7 percent in 2006 to 4 percent in 2007. New freezes reached their highest levels in 2006, when 42 additional firms on the FORTUNE 1000 list had frozen plans.