Posts Tagged "municipal worker"

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Some Public Sector Pensions are Inadequate

About 5 million employees in state and local government are not currently part of the Social Security system.

Federal law tries to protect them by requiring that their traditional government pensions provide the same retirement benefits they would receive if they and their employers were instead contributing to Social Security.

But the Center for Retirement Research finds that roughly 17 percent of these workers’ pensions fall short of that modest standard. The reasons involve how long they remain in their government jobs and how their pensions are calculated.

Let’s start with the workers who usually do not fall short: career public sector employees. They are protected because their pension annuities are based on their average salaries in the final years of employment when pay tends to be at its highest. In that way, pensions resemble Social Security. The benefits retain their value because they are based on a worker’s 30 highest years of wages, which Social Security adjusts upward at the rate of average wage growth.

Another group that is relatively unscathed are employees who have worked no more than five years in a government job. If they spend most of their careers in the private sector, they will accumulate many years of Social Security coverage in those jobs.

The government workers most at risk are in medium-tenure jobs lasting about 6 to 20 years, the researchers found. If they leave government mid-career, the wage growth they miss out on will have substantially eroded their pensions. … Learn More