Behavioral Economics Perspectives On Public Sector Pension Plans
The authors describe the pension plan features of the states and the largest cities and counties in the U.S. Unlike in the private sector, Defined Benefit (DB) pensions are still the norm in the public sector. However, a few jurisdictions have shifted towards Defined Contribution (DC) plans as their primary savings plan, and fiscal pressures are likely to generate more movement in this direction. Holding fixed a public employee's work and salary history, they show that DB retirement income replacement ratios vary greatly across jurisdictions. This creates large variation in workers' need to save for retirement in other accounts.