Tag: Glenn R. Springstead

State and Local Government Employees Without Social Security Coverage: What Percentage Will Earn Pension Benefits That Fall Short of Social Security Equivalence?

Mary Pat Campbell

Link: https://www.ssa.gov/policy/docs/ssb/v82n3/v82n3p1.html

Graphic:

Excerpt:

Analysis based on a synthetic population of noncovered state and local government workers confirms earlier results based on a sample of retirement plan benefit formulas: Workers with medium-length government tenures are at risk of receiving lifetime retirement income that falls short of Social Security equivalence. Given the distributions of the synthetic population of noncovered workers by occupation, retirement-plan benefit formula, and tenure in government employment, this translates to about 16 percent of all noncovered workers at risk of receiving less retirement income than they would have received from Social Security alone had they spent their whole careers in covered employment.

Although the share of workers with projected retirement benefits that fall short of Social Security equivalence is not large, the problem is serious. Social Security is intended to provide a minimum level of retirement income for all Americans. Covered public-sector workers and many private-sector workers augment their Social Security benefits with employer-sponsored retirement plans. The concern is that pension benefits ultimately will not meet that minimum level for 750,000 to 1 million noncovered workers annually who cannot augment those benefits with Social Security income.

Author(s):  Jean-Pierre Aubry, Siyan Liu, Alicia H. Munnell, Laura D. Quinby, and Glenn R. Springstead

Social Security Bulletin, Vol. 82 No. 3, 2022 (released August 2022)

Publication Date: August 2022

Publication Site: Social Security Administration

Vesting Requirements and Key Benefit-Formula Features of State and Local Government Pension Plans

Mary Pat Campbell

Link: https://www.ssa.gov/policy/docs/ssb/v81n1/v81n1p1.html

Excerpt:

This article provides a quantitative analysis of some key features of state and local pensions, including vesting requirements, the FAS period, and the benefit formula multiplier. This analysis focuses on public pensions in states that account for large numbers of noncovered public-sector workers. Among its unique contributions is the weighting of the summary statistics by population—in this instance, by the active membership in each benefit tier. This weighting mechanism is of special importance for occupation groups such as teachers, whose number of benefit tiers are underrepresented relative to active members, and public safety workers, whose tiers are overrepresented relative to active membership.

The findings in this article provide supporting evidence of a benefit retrenchment across state and local pensions, at least in states where noncovered employment is most common. Benefit tiers that are not open to new hires tend to have shorter vesting periods, shorter FAS periods (resulting in higher FASs), and higher benefit multipliers. As states have sought to reduce pension expenses, they have tightened eligibility requirements by increasing vesting periods, and have lowered benefits by increasing the FAS period and reducing the benefit formula’s multiplier.

This is not particularly surprising, given the recent economic conditions and plan funding levels that have led to pension reforms. However, the analysis shows that those changes have not affected all types of state and local workers equally. Changes in the FAS period, for example, affect public safety workers and local-level general government employees more than they affect teachers.

Author: Glenn R. Springstead

Publication Date: February 2021

Publication Site: Social Security Administration, Social Security Bulletin