Spillovers from state and local pensions to Social Security

Abstract

Federal law allows certain state and local government employees to be excluded from Social Security coverage if they are covered by an employer pension of sufficient generosity. Public sector retirement systems have grown less generous in recent years, and a couple of plans could exhaust their assets in the next decade, putting benefits at risk. If pension sponsors are inattentive to federal generosity requirements when cutting benefits, current and future initiatives to curb costs may conflict with their obligations to the U.S. Social Security Administration (SSA). This project combines data from a variety of sources to assess whether state and local governments are currently satisfying the federal standards and whether the standards continue to provide benefits of equal generosity to Social Security.