State and Local Government Pensions Are Different From Private Plans

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As baby boomers begin to retire, governments must adapt and prepare for the changes ahead. And while there is increasing media scrutiny of the financial implications of state and local government pension plans and retiree health programs, there is little research data or information about effective strategies that can help policy leaders make wise decisions.

This issue brief, the first research study published by the Center, identifies the key differences between employer-sponsored pension plans in the private and public sectors. Key observations include:

  • Public plans are primarily defined benefit, coverage is virtually universal, and only 70 percent of workers are in Social Security.
  • Private plans are mostly 401(k)s, less than half of the workforce is covered, and everyone participates in Social Security.
  • Public plans provide larger benefits, but rely more on employee contributions.
  • Plans in both sectors, though, invest about 70 percent of their assets in equities and their defined benefit plans are 80 to 90 percent funded.
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