A report released today by the TIAA-CREF Institute and the Rockefeller Institute of Government shares expert considerations for public sector pension reform. The new report – Public Sector Pension Reform: Addressing Pressing Fiscal Realities from a Long-Term Perspective – is a culmination of insights and experiences from state and local officials and researchers from across the nation that highlights the issues and considerations impacting public sector pension reform.
While 99 percent of full-time public sector employees have access to an employment-based retirement plan – primarily through a defined benefit pension plan – budgetary pressures, evolving workforce demographics, and longer-term pension plan finance and benefit trends have led almost all states and many local governments to consider and implement various reforms of the plans they sponsor. States and localities, however, continue to grapple with pension reform.
Against this backdrop, the TIAA-CREF Institute and the Rockefeller Institute of Government convened state and local officials, union leaders, and researchers from across the nation to share their own insights and experiences, shedding light on many of the issues impacting public pension plan reform.
The report highlights several key considerations for public pension reform, including:
•Pension reform should evaluate individual defined benefit and defined contribution plan elements and consider hybrid arrangements of both plan designs that leverage complementary characteristics of each;
•Pension reform must take into consideration changing lifestyle and workforce patterns and should be designed to enable the public sector to compete with private employers for top talent;
•Plan reform must consider both short-term fiscal challenges as well as long-term human resource trends and objectives. While underfunding issues must be addressed on a state-by-state basis, reform also needs to be considered from a national perspective.
“This convening provided an opportunity to source the best minds for considering public pension reform strategies in hopes of gaining insight and sparking actionable debate,” said TIAA-CREF Institute Senior Managing Director Stephanie Bell-Rose. “The TIAA-CREF Institute is committed to fostering further dialogue as this national conversation continues to unfold.”
“Plan design is a critical component of reform discussions,” said TIAA-CREF Institute Senior Economist Paul Yakoboski. “While many older defined benefit plans were premised on a career employment model in the public sector, that model no longer fits the experience of many current employees and is even less likely to apply in the future. Future plan design must take into account changing lifestyle and workforce patterns.”
“Public pensions and their financing have been divisive issues in many state and local governments in recent years, and meeting pension obligations will continue to be a challenge in many state and local governments for years to come,” said Rockefeller Institute Director Thomas Gais. “Our forum was distinctive in that it went well beyond the immediate fiscal crisis and considered the wide range of values and options involved in designing affordable pensions for the very important people who teach our children, police our streets, oversee public health, and maintain our infrastructure.”