State and Local Pension Reforms Since the Financial Crisis

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Pension reform has been widespread among state and local governments in the wake of the financial crisis. Many plans have reduced benefits and increased required employee contributions in an effort to curb rising employer costs.

While prior research suggests that most state plans have made some changes, less information is available about reforms at the local level. Using data from 2009 to 2014 for over 200 major state and local plans, this brief examines patterns of reforms, what changes have been most common, the role of legal protections, and what factors are associated with reforms. Key findings include:

  • 74 percent of state plans and 57 percent of large local plans have cut benefits and/or raised employee contributions to curb rising costs;
  • While the majority of state and local plans reduced benefits for new employees only, 25 percent also cut benefits for current employees;
  • The two most common benefit reductions for current employees were increases in employee contributions and reductions to the COLA;
  • New employees experienced the greatest reductions in core benefits, most commonly: (1) increases in the age and tenure required to claim benefits and (2) reductions in the benefit multiplier and lengthening of the period used to calculate final average salary; and
  • Plans more likely to make cuts had the highest annual required contribution (ARC) as a percentage of revenue or had lower employee contributions.
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