Pension Benefits for State, Local, and Teacher Retirees

Abstract

Approximately-95% of state and local government employees are in pension plans that have adjusted for cost-of-living increases either automatically and/or in an ad hoc manner. These cost-of-living adjustments, however, seldom keep pace with inflation. This study gathered information on the actual adjustments provided to retirees during the period of 1982 to 1987, through telephone interviews with all 76 state teacher and public employee plans in the country. In-depth interviews, conducted in eight states, also assessed the political and economic factors influencing decisions about cost-of-living adjustments. Our research indicates a clear upward trend in replacement rates provided by most state pension plans between 1969 and 1982. This trend can be traced to specific changes in plan provisions that, in turn, result from interactions between the process of proposing and legislating changes to pension plan provisions and economic conditions at the time that such proposals are made.