Sources of Funding of Public Pension Plans

Source: EBRI Issue Brief, no. 127, June 17, 2009

What are the major sources of funding of public-sector pension plans in the United States?

Unlike private-sector defined benefit plans, public-sector pension plans are not funded entirely by employers. They are financed by workers as well as employers, according a study by the nonpartisan Employee Benefit Research Institute (EBRI). Public pension revenue relies on three sources: earnings from investments, government (employer) contributions, and worker contributions. Public pension plans depend largely on investment earnings, because they are generally financed on a “funded” basis rather than a pay-as-you-go basis.

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