More than 30 million Americans participate in some form of public government employee retirement plan. This number includes federal, state, and local government employees; military personnel; teachers, police, and firefighters; and everyone who is entitled to a pension because they work for a government entity. These thousands of plans vary enormously in every aspect: coverage, benefit levels, vesting rules, employee contributions, early retirement provisions, integration with Social Security, inflation protections, and funding soundness.
Compared with private defined-benefit plans, public plans provide higher benefit amounts, greater benefit adequacy, better inflation protection, and lower ages for benefit eligibility. Disparities between women’s and men’s benefits, and between the pension benefits of racial and ethnic groups that have experienced discrimination and whites’ benefits, tend to be smaller in the public sector than in private plans. Because most public plans require worker contributions, participants tend to be better informed about their plan’s status and anticipated benefits than are private retirement plan participants, although an important exception exists in the area of how public plans can affect Social Security benefits.
Critics of public retirement systems often claim that the benefits are excessively generous compared with those in the private sector. However, retirement benefits are only one part of total compensation, and total compensation should be the yardstick for judging whether public employees are paid more or less than their private-sector counterparts. In fact, research from the National Institute on Retirement Security and the Center for State and Local Government Excellence found that, on average, total compensation is 6.8 percent lower for state employees and 7.4 percent lower for local employees than for comparable private-sector employees.