Research & Analysis by Alicia H. Munnell
Pensions for State and Local Government Workers Not Covered by Social Security: Do Benefits Meet Federal Standards?
Federal law allows certain state and local governments to exclude employees from Social Security coverage if the employees are provided with a sufficiently generous pension. Approximately 6.5 million such workers were not covered by Social Security in 2018. Retirement systems for noncovered workers have become less generous in recent years, and a few plans could exhaust their trust funds within the next decade, putting beneficiaries at risk. This article examines data from a variety of sources to assess whether state and local governments currently satisfy the federal standards for retirement plan sufficiency and whether the standards ensure benefits equivalent to those from Social Security.
How Do Trends in Women's Labor Force Activity and Marriage Patterns Affect Social Security Replacement Rates?
Changes in the role of women in the economy and in the family have affected both the amount and the type of Social Security benefits they receive in retirement. Women's labor force participation rate increased from less than 40 percent in 1950 to more than 70 percent in 2011. Over much of the same period, marriage rates fell and divorce rates rose. This article examines how women's higher earnings and lower marriage rates have affected Social Security replacement rates over time for individuals and for households.
In addition to variables such as age, income, and job tenure, the length of an employee's planning horizon is a crucial factor affecting participation in and contribution to a 401(k) plan. On the plan side, the most important factors are the availability of matching contributions from the employer and the ability of employees to gain access to their funds before retirement through borrowing. Good information about the need for retirement savings and good plan design could significantly increase eligible employees' participation and contributions.