The Urban Institute

To assess disincentives in state and local defined benefit pension plans for working longer

  • Amount $416,230
  • City Washington, DC
  • Investigator Richard Johnson
  • Year 2010
  • Program Research
  • Sub-program Working Longer

Unlike in the private sector, almost all state and local government workers-from employees of state agencies to public school teachers and policemen-participate in defined benefit pension plans. Not only do these plans strain public budgets, they generally incent early retirement by penalizing work at older ages. Funds from this grant will support a project by the Urban Institute to enhance knowledge and awareness of the work disincentives created by state and local defined benefit pension plans and of existing reform options that encourage public?sector employees to work longer. Under the direction of Richard Johnson and Eugene Steuerle, this project will accomplish several objectives over the course of three stages of work. The first stage of the project will quantify work disincentives in state and local defined benefit pension plans, compare disincentives across states and localities and across occupations, and identify existing reforms that have reduced work disincentives. The second stage of the project will match these disincentive measures to state and local workers in the Survey of Income and Program Participation (SIPP) and model their impact on work and retirement decisions. The final stage will follow state and local retirees over time in the SIPP and the Health and Retirement Study (HRS) to measure their economic status and the share who return to work, either in the public or private sector. Ultimately, this project will enrich our understanding of how defined benefit pension plans discourage work at older ages and identify reforms that do or potentially could encourage later retirement.

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