In the United States there are two common types of retirement plans. The first are defined benefit (DB) plans, in which the employer guarantees the retirement benefits and makes investment decisions of retirement assets on behalf of the employee. The second plan type is defined contribution plans (DC), in which the employer pledges fixed contributions into an investment account and the employee has the discretion to allocate the assets into investments of choice.
In the United States, public sector employees are offered mostly DB plans. While about 83 percent of public sector employees are currently enrolled in a DB plan in 2020, only 16 percent of employees in the private sector have access to a DB plan in 2020 (Bureau of Labor Statistics 2020). Even the federal government has, since 1987, offered its DC option, the Thrift Savings Plan, as a supplement to its standard annuity plan.
Public pensions represent a fiscal cost for state and local governments. In fiscal year 2020 state and local governments made about $180 billion in pension contributions, which corresponds to about 5.2% of general spending; a substantial increase over the 2.3% in fiscal year 2000 (NASRA 2020).
As the liabilities associated with DB plans continue to grow, the opinions of the state and local employees regarding their retirement prospects serve as an important input into public policy. The outcome of this study may help to improve the satisfaction of public employees with their retirement options and help insure the long-term stability of public sector retirement plans in the United States.