The report calculates the retirement income that state and local employees hired under the new benefit conditions can expect, and compares it with the retirement income they would have earned before the plan was changed. The report was produced with financial support from AARP.
Since 2009, 45 states have responded to fiscal constraints by making significant changes to their retirement plans, including increasing employee contributions, reducing benefits, or both. Other states have modified their plan design, choosing to transfer more of the risk associated with providing retirement benefits from the state and its political subdivisions to its employees.
The report also summarizes interviews conducted with public sector human resource executives and retirement experts from 10 states that have made significant pension plan changes (Alabama, California, Colorado, Hawaii, Missouri, Ohio, Pennsylvania, South Carolina, Tennessee, and Virginia).
Although newly hired employees will need to work longer or save more to have the level of retirement benefit that employees previously earned, state human resource officials say that wage stagnation and the increased cost of benefits for employees is a more immediate concern. To address the savings gap, many plan administrators are providing enhanced financial education and sponsoring and promoting supplemental savings opportunities.