Public-Employee Pensions and Retirements

Abstract

Around the time of their adoption, reformers argued pensions would help encourage public employees to retire rather than remain in their jobs indefinitely. However, the significance of specific pension policies for retirements within numerous plans is not well-known. Using new data on service retirements from 81 state-employee defined-benefit plans between 2001 and 2019, I examine pensions’ relationship with retirements, while also accounting for other variables that might matter. The results indicate that early retirement incentives, relaxed post-retirement work restrictions, and higher employee pension contributions are all associated with more retirements, while increased employer contributions and cost-of-living adjustments are associated with fewer. As governments continue to consider fiscal reforms to retirement plans, they also should keep their personnel needs and pensions’ relationships with them in mind.