Aubry & Crawford: State and Local Pension Reform since the Financial Crisis

From the Introduction:

In the wake of the financial crisis, many state and local pension plans have reduced benefits and increased required employee contributions to curb rising employer costs. While past research suggests that most state plans have made some changes, little information is available about reforms at the local level.

This brief documents and compares the reform patterns for over 200 major state and local plans between 2009 and 2014 and investigates how and why the changes were made. The discussion proceeds as follows. The first section describes the data and methodology. The second section provides background on legal protections that might impede changes in benefits for current employees. The third section catalogues and compares the benefit  reforms made since the financial crisis – separately assessing reforms applied to current employees and to new hires. The fourth section introduces a regression analysis to better understand what factors have motivated both reforms overall and reforms aimed at current employees. The fifth section presents the regression results. The final section concludes that, unsurprisingly, the biggest factor related  to reforms overall was the cost of the plan relative to the total revenue of its sponsoring government, while the main factor related to reforms for current employees was the strength of state legal protections for benefits.

 

Available for download here.

Advertisements