Industry News

On February 18, 2020, the Center for Retirement Research at Boston College (CRR) published its issue brief, An Introduction to Police and Fire Pensions.  According to CRR, the pension and retiree health benefit costs of public safety workers are higher than those for other local government workers mainly due to earlier retirement ages for public safety workers.  The focus on benefit costs continues to be pertinent as government plan sponsors consider and implement reforms, evaluate plan assumptions, and work to ensure adequate plan funding.  The brief is based on public safety employee group data from the Public Plans Database, U.S. Census Bureau, and governmental pension plans’ actuarial valuations to assess the size of public safety retiree benefit costs. 

Some of the key findings include:

• In 2016, public safety workers account for only 17% of the total local government compensation costs;
• For pension benefits, the annual cost for public safety workers comprised 15% of payroll compared to 8% for non-public safety local government employees;
• For retiree health care, the annual cost for public safety workers comprised about 6% of payroll compared to about 4% for non-public safety local government employees;
• Recent studies suggest that public safety workers may be able to work at later ages, which could affect retirement benefit design and plans’ retirement ages; and
• Any shift in retirement age may involve an increase in wages to maintain total compensation for public safety workers.

The brief concludes, “From a plan design standpoint, governments may choose to pursue reforms to ensure that retirement benefits align with employees’ work-ability at later ages.  But any reforms would have limited impact on government finances because public safety retirement costs represent only 2 percent of total local government expenditures.” 

The brief is available here.