Center for State and Local Government Excellence highlights differences between government and private plans

November 16, 2007

The Center for State and Local Government Excellence has issued a new issue brief that analyzes why state and local pension plans differ from those offered by the private sector.

The brief reports the initial findings of a two-year research study funded by the Center. The research grant was awarded to the Center for Retirement Research (CRR) at Boston College to establish a data clearinghouse on state and local pension plans and explore their funding status and economic impact. Although state and local plans cover about 10 percent of the workforce and hold more than 20 percent of the nation’s total pension assets, to date research and data collection have been limited and fragmentary.

The brief was authored by Alicia H. Munnell, Peter Drucker professor of management sciences in Boston College’s Carroll School of Management and CRR director, and Mauricio Soto, CRR senior research associate. The brief’s key findings are:

• Public plans are primarily defined benefit, coverage is virtually universal, and only 70 percent of workers are in Social Security.
• Private plans are mostly 401(k)s, less than half of the workforce is covered, and everyone participates in Social Security.
• Public plans provide larger benefits, but rely more on employee contributions.
• Plans in both sectors, though:
  • invest about 70 percent of their assets in equities; and
  • their defined benefit plans are 80 to 90 percent funded.

To download the full issue brief, visit http://www.slge.org/research. Pensions & Investments Magazine highlighted the Center and the new issue brief in its Nov. 26, 2007 online edition. To read the article, please click here.

About the Center for State and Local Government Excellence
The Center for State and Local Government Excellence helps state and local governments become knowledgeable and competitive employers so they can attract and retain a talented and committed workforce. The Center identifies best practices and conducts research on competitive employment practices, workforce development, pensions, retiree health security, and financial planning. The Center also brings state and local leaders together with respected researchers and features the latest demographic data on the aging workforce, research studies, and news on health care, recruitment, and succession planning on its website, www.slge.org.