US. Public Retirement Benefits Not What They Used to Be
Defined benefit (DB) pension plans are a valuable benefit for employees—offering the option of guaranteed retirement income that is lacking in most defined contribution (DC) plans.
Some private-sector employees have been envious of the pension benefits provided to public-sector employees. Over the years some outsiders have even argued that public pensions are too generous, perhaps without understanding that many public employees are required to put a significant percentage of their own pay into the plans. And there has been misunderstanding about the amount of support public pensions get from taxpayers.
A report from the National Institute on Retirement Security (NIRS) that aimed to examine Americans’ views on public retirement plans says state and local pensions are funded from three sources: employer contributions, employee contributions and investment earnings. Between 1993 and 2018, about 25% of public pension fund receipts came from employer contributions, 11% from employee contributions, and about 64% from investment earnings. “This means that earnings on investments historically have made up the bulk of pension fund receipts, even during two market downturns, and taxpayers are funding only a portion of these benefits,” the NIRS says.
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