U.S. BUREAU OF LABOR STATISTICS COMPENSATION AND WORKING CONDITIONS

Page 1

The Structure of State and Local Government Retirement Benefits, 2008

by William J. Wiatrowski

Bureau of Labor Statistics

Originally Posted: February 25, 2009

New data from the National Compensation Survey show that 92 percent of government workers have access to one or more

types of retirement benefits; 84 percent have access to a traditional defined benefit plan, and two-thirds of those with any

retirement benefits have access to more than one plan.

The transition from retirement plans that provide a guaranteed stream of income for life--defined benefit plans--to those that

put the risk on employees to contribute, invest prudently, and produce a sufficient account balance for retirement--defined

contribution plans--has been well-documented among private companies.1 Less has been written about the retirement

benefits of State and local government workers. New data from the National Compensation Survey (NCS) reveal that these

workers are more likely to be part of plans that offer guaranteed retirement income than their private-sector counterparts and

more often have multiple plans available to them. The structure of their retirement income benefits further diverge from those

offered in private industry in a number of ways, including contribution requirements and plan design.

The Bureau of Labor Statistics (BLS) has been publishing data on State and local government worker benefits periodically

since 1987. The publication of results from the 2007 and 2008 surveys marks the first release of these data since 1998. The

data reveal some changes in government retirement benefits over the period from 1987 to 2008. Perhaps more importantly,

expanded data now available from the 2008 survey reveal more details about the structure of these retirement benefits.2

State and local governments are not subject to the same regulations on retirement benefits that are imposed on private

sector benefits by the Employee Retirement Income Security Act of 1974 (ERISA). In the past, State defined benefit plans

were often operated on a “pay as you go” basis, meaning that specific funds were not set aside to ensure that future benefits

could be paid. More recently, States have instituted their own retirement plan regulations, and many States now have

provisions for funding their pension liabilities.3

Another difference in retirement benefits between government and private workers is the availability of Social Security. In the

past, many governments opted out of Social Security, providing instead a generous pension plan designed to match the

benefits that private workers might get from both Social Security and a pension. Following Social Security reforms in the

1980s and 1990s, however, governments could no longer opt out of Social Security and new government workers typically

had Social Security coverage. According to Social Security Administration estimates, about 70 percent of State and local

government workers are currently covered by Social Security.4 Even with this expanded Social Security coverage among

government workers, the structure of retirement benefits coming directly from public employers differs considerably from that

of private employers.

2008 Survey Results

BLS data on State and local government employees show that 84 percent of workers in 2008 had a defined benefit plan

available to them; in contrast, 22 percent of private industry workers had such a plan available to them in the same year.

Conversely, 30 percent of government workers had a defined contribution plan available, while such plans were available to

62 percent of private industry workers. These results suggest that, beyond Social Security, the primary form of employerprovided retirement income benefit among the two groups stands in sharp contrast: defined benefit plans for government

workers and defined contribution plans for private industry workers.5

Just as the structure of retirement plans differs between public and private sector workers, so too has the pace of change in

retirement plans differed between the two sectors. From 1986 to 2008, participation in defined benefit plans among full-time

workers in private industry declined from 76 percent to 24 percent. Over a similar period (1987–2008), State and local
U.S. BUREAU OF LABOR STATISTICS COMPENSATION AND WORKING CONDITIONS

Page 2

government employee participation in defined benefit plans declined modestly--from 93 percent of full-time workers in 1987 to

88 percent of full-time workers in 2008.6

An interesting and growing phenomenon among government workers is the availability of defined contribution plans that

allow employees to defer taxes on their contributions but do not provide any employer contributions. Technically, these plans

are defined contribution plans, but because they do not include employer funds, the NCS distinguishes these plans from

more traditional defined contribution plans. These employee-contribution-only plans are available to certain government

workers based on their employment. Employers process payroll deductions and forward funds to an investment company, but

these plans are often administered by the investment company independent of the employer. Often employees have a choice

of many companies to administer their plan and invest their contributions. This differs from traditional defined contribution

plans with employer funds, which are typically administered by the employer.

BLS benefits surveys have tracked the availability of employee-contribution-only plans for many years, considering them a

benefit to the employee because of the tax deferral that is only available due to the employment relationship. These plans

exist in both the private and public sectors, but their availability has been low, especially in the private sector. In 2008, for

example, only 17 percent of private industry workers had access to such a benefit. But this kind of benefit has become more

common among government workers: in 1998, only 22 percent of full-time State and local government workers had access to

such a benefit, but by 2008 that figure had climbed to 59 percent. These plans typically allow tax-deferred contributions under

section 403(b) or 457 of the Internal Revenue Code, which are similar to 401(k) provisions, but are exclusively for certain

government workers.7

The availability of employee-contribution-only plans is different for different groups of government workers. Workers in higher

education are generally the most likely to have such plans available to them--69 percent of workers in junior colleges,

colleges, and universities had access to such plans. One entity that administers such plans is the Teachers Insurance and

Annuity Association of America and the College Retirement Equities Fund (TIAA-CREF), an independent organization that

provides financial management services for educators and related workers.8 Participants work directly with TIAA-CREF and

other organizations to determine amounts of contribution, investments, and retirement distributions, including lifetime

annuities.

Because the availability of defined benefit plans is high among government workers, both traditional defined contribution

plans and employee-contribution-only plans tend to be supplemental plans--that is, they are in addition to defined benefit

plans and often, as noted earlier, in addition to Social Security as well. New tabulations from the 2008 NCS show that 67

percent of all those with access to retirement plans have multiple plans. Further, 70 percent of those with defined benefit

plans have one or more additional plans, often an employee-contribution-only plan. Looking in more detail at those workers

with access to a defined benefit plans, 87 percent of those employed by colleges and universities and 88 percent of those in

State government have multiple plans. For those with only one plan, that was most often a defined benefit plan. It was rare

for employees to have just a traditional defined contribution plan (3 percent of all workers) or just an employee-contributiononly plan (2 percent of all workers).

Table 1 and table 2 provide an overview of the types of plans available to State and local government workers. Table 1

indicates that 92 percent of all State and local government workers have access to at least one retirement plan. Most of these

workers have a defined benefit plan, either with an employee-contribution-only plan (35 percent) or with no other plan (25

percent). Table 1 also shows the percent of workers with access to each type of retirement plan individually, without regard to

the availability of other plans. Table 2 presents the same data on retirement plan access in a different way, as each type of

plan is considered independently. These data confirm that most State and local government workers have access to more

than one retirement plan, and they further confirm that access to a defined contribution plan by itself or an employeecontribution-only plan by itself is rare. Data from both tables demonstrate consistent patterns across many types of workers,

with one exception being part-time workers, who tend to have less overall access to retirement plans. For example, 99

percent of full-time State and local government workers have access to a retirement plan, compared with 52 percent of parttime workers.
U.S. BUREAU OF LABOR STATISTICS COMPENSATION AND WORKING CONDITIONS

Page 3

Employee Contributions

Although government workers have extensive retirement income benefits available to them, such benefits often require

employee contributions. Only 4 percent of participants in private industry defined benefit plans were required to contribute

toward the cost of the plan in 2008, compared with 77 percent of their State and local government counterparts. Historically,

State and local government workers were not in the Social Security system, so the required contribution was thought to be

similar to a private sector workers required contribution to Social Security.

Contribution provisions differ by type of plan. Defined benefit plans (for both private industry and State and local government

workers) are often mandatory--workers are automatically plan participants as a term of their employment. For government

workers with a required plan contribution, the average contribution is 6.3 percent of earnings. This is in addition to required

contributions to Social Security, which are currently 6.2 percent of earnings up to an earnings maximum.

Most traditional defined contribution plans require an employee contribution as a condition to becoming a participant. In

private industry, the majority of such plans are considered savings-and-thrift plans, which require an employee contribution

that is matched by employer funds. Such plans exist among government workers as well, as do plans that are funded entirely

by the employer.9 Finally, employee-contribution-only plans, by definition, require employee contributions.

Looking at the 92 percent of government workers with some type of retirement plan, 84 percent were in plans with an

employee contribution. (See table 3.) Such contributions could be mandatory, such as those to a defined benefit plan (which

averaged 6.3 percent of earnings in 2008). Alternatively, contributions could be voluntary--either to a traditional defined

contribution plan or to an employee-contribution-only plan--and often range up to 10 or 15 percent of earnings (with a

maximum dollar amount specified annually by the Internal Revenue Service). Given that many of these workers are also

covered by Social Security, with its mandatory contribution of 6.2 percent of earnings, total employee retirement plan

contributions could easily reach 20 percent or more of earnings.

Summary

New NCS data on State and local government benefits reveal a number of facts about retirement income benefits for its

workers: • The extent of benefits is broad: 92 percent have access to one or more benefits. • Guaranteed defined benefit plans are prevalent: 84 percent of all workers have access to such plans. • The extent of multiple plans is substantial--two-thirds of those with any retirement benefits have access to more than

one plan--and more widespread than in private industry. • Plans often involve either mandatory or voluntary employee contributions.

William J. Wiatrowski

Associate Commissioner, Office of Compensation and Working Conditions, Bureau of Labor Statistics.

Telephone: (202) 691-6300; E-mail: Wiatrowski.William@bls.gov. Notes

1 See, for example, Stephanie L. Costo, “Trends in retirement plan coverage over the last decade,” Monthly Labor Review, February 2006, pp.

58–64.

2 Benefits data are from the BLS surveys of benefits provided by employers. The first survey of State and local government workers, in 1987,

was part of the BLS Employee Benefits Survey program; results may be found in Employee Benefits in State and Local Governments, 1987, Bulletin 2309 (Bureau of Labor Statistics, May 1988). More recent benefits data are part of the BLS National Compensation Survey program.

Results from the 2008 survey may be found in National Compensation Survey: Employee Benefits in the United States, March 2008, Bulletin

2715 (Bureau of Labor Statistics, September 2008).

3 For background information on State and local government retirement plans, see State and Local Government Retiree Benefits, Report

07-1156 (U.S. Government Accountability Office, September 2007).

4 Ibid.
U.S. BUREAU OF LABOR STATISTICS COMPENSATION AND WORKING CONDITIONS

Page 4

5 Data from the Bureau of Labor Statistics study of employee benefits in private industry may be found in National Compensation Survey:

Employee Benefits in the United States, March 2008, Bulletin 2715 (Bureau of Labor Statistics, September 2008). Data on the percent of

workers with a benefit available to them are referred to by the survey as “access to a benefit.” Workers are counted as having access to a

benefit regardless of whether they are currently covered by the plan.

6 Data from the 1987 survey of State and local governments are limited to full-time workers in government units with 50 or more workers and

exclude State and local government in Alaska and Hawaii. Data for 2007 include all workers and government units of all sizes in all States,

with break-outs for full-time and part-time workers, and other groupings. Similarly, data from the 1986 survey of private industry are limited to

full-time workers in larger establishments. Data from the 1986 and 1987 surveys are limited to “benefit participation,” that is those workers who

are currently covered by the plan. For consistency, certain comparisons are restricted to participation data for full-time workers. Readers are

cautioned that, for much of these data, no variances are available, and no tests of statistical significance were performed on comparisons.

7 Calculations of retirement plan access presented in this article have been updated to reflect changes in definitions first released by BLS in

December 2008. For more information, see Natalie Kramer and Alan Zilberman, “New Definitions of Employee Access to Paid Sick Leave and

Retirement Benefits in the National Compensation Survey,” Compensation and Working Conditions Online, December 2008. In addition, data

in this article expand upon the regularly-published BLS benefits data to include employee-contribution-only plans. Table 1 includes estimates

for previously unpublished combinations of employee-contribution-only plans with other retirement plans and also previously published

combinations of retirement plans with employer contributions. For example, the total in table 1 for all workers is 92 percent; if only those plans

that include an employer contribution are considered, the total is 90 percent. BLS only captures data on access to employee-contribution-only

plans; no plan participation or provision data are available.

8 For more information on TIAA-CREF, the Teachers Insurance and Annuity Association of America and the College Retirement Equities

Fund, visit their website at http://www.tiaa-cref.org/index.html.

9 In State and local governments, defined contribution plans that may not require employee contributions are typically money purchase plans.

In such plans, which are also available in the private sector, employers contribute a percent of employee earnings to an individual account that

is invested and available to the employee at retirement. Other private sector defined contribution plans that may not require employee

contributions include profit sharing and certain stock plans.

Table 1. Percent of workers with access to retirement plans, State and local government workers, National

Compensation Survey, March, 2008

Total

Retirement

plan with

employer

contribution

Defined benefit plan with

Defined

contribution plan

with

Employeecontribution

only

plan

with no

other

plan

Total

defined

benefit

plans

Total

defined

contribution

plans

Total

employeecontributiononly

plans

No

other

plan

Defined

contribution

plan

Employeecontributiononly plan

Defined

contribution

and

employeecontributiononly plan

No

other

plan

Employeecontributiononly

plan

All workers 92 90 25 10 35 14 3 3 2 84 30 54

Worker characteristics

Management,

professional, and

related

94 92 26 9 36 16 2 2 2 87 30 56

Professional

and related 94 91 27 9 36 15 2 2 2 87 28 55

Teachers 94 91 31 9 36 13 * 2 2 89 24 54

Primary,

secondary,

and

special

education

98 97 37 9 43 7 * * 1 97 16 52

Asterisk equals less than 0.5 percent.
U.S. BUREAU OF LABOR STATISTICS COMPENSATION AND WORKING CONDITIONS

Page 5

Total

Retirement

plan with

employer

contribution

Defined benefit plan with

Defined

contribution plan

with

Employeecontribution

only

plan

with no

other

plan

Total

defined

benefit

plans

Total

defined

contribution

plans

Total

employeecontributiononly

plans

No

other

plan

Defined

contribution

plan

Employeecontributiononly plan

Defined

contribution

and

employeecontributiononly plan

No

other

plan

Employeecontributiononly

plan

school

teachers

Service 86 84 24 10 32 11 4 3 3 77 28 49

Protective

service 92 91 23 13 33 15 3 4 2 84 35 53

Sales and office 93 91 20 11 36 14 5 3 2 82 34 56

Office and

administrative

support

94 92 21 10 37 15 5 3 2 83 33 57

Full time 99 99 26 11 39 16 3 3 1 92 34 59

Part time 52 40 18 2 13 4 2 1 12 38 9 30

Union 98 97 28 10 42 15 1 1 1 96 26 59

Nonunion 87 84 22 9 29 14 5 4 4 74 33 51

Establishment characteristics

Education and

health services 94 91 27 9 36 14 3 2 3 86 28 55

Educational

services 94 91 29 8 38 13 1 2 3 89 23 55

Elementary

and

secondary

schools

94 93 35 8 41 8 * * 2 92 16 51

Junior

colleges,

colleges,

and

universities

91 86 10 10 28 29 2 6 6 78 47 69

Health care

and social

assistance

94 92 13 15 22 22 16 5 2 71 57 51

Hospitals 96 93 11 14 21 22 19 6 3 68 60 52

Public

administration 91 89 22 12 34 16 3 3 2 83 33 54

State

government 96 93 11 9 37 31 2 3 3 88 45 74

Local

government 91 89 30 10 34 9 4 3 2 82 25 48

Asterisk equals less than 0.5 percent.
U.S. BUREAU OF LABOR STATISTICS COMPENSATION AND WORKING CONDITIONS

Page 6

Table 2. Percent of workers with access to each type of retirement plan by availability of multiple plans (1), State and

local government workers, National Compensation Survey, March 2008

All retirement plans Defined benefit Defined contribution Employee-contributiononly plans

Single

plan

Multiple

plans

With

other

plans

Without

other plans

With

other

plans

Without

other plans

With

other

plans

Without

other plans

All workers 33 67 70 30 89 11 96 4

Worker characteristics

Management, professional, and

related 33 67 70 30 92 8 96 4

Professional and related 34 66 69 31 93 7 96 4

Teachers 36 64 65 35 98 2 96 4

Primary, secondary, and

special education school

teachers

39 61 62 38 99 1 98 2

Service 35 65 69 31 87 13 94 6

Protective service 31 69 72 28 91 9 97 3

Sales and office 30 70 75 25 85 15 96 4

Office and administrative

support 30 70 75 25 85 15 96 4

Full time 30 70 72 28 90 10 99 1

Part time 60 40 53 47 83 17 61 39

Union 30 70 70 30 98 2 99 1

Nonunion 35 65 70 30 84 16 93 7

Establishment characteristics

Education and health services 35 65 68 32 90 10 95 5

Educational services 35 65 67 33 97 3 95 5

Elementary and secondary

schools 39 61 62 38 98 2 96 4

Junior colleges, colleges,

and universities 19 81 87 13 96 4 92 8

Health care and social

assistance 33 67 81 19 72 28 96 4

Hospitals 34 66 84 16 69 31 95 5

Public administration 30 70 73 27 90 10 97 3

State government 16 84 88 12 96 4 96 4

Local government 39 61 64 36 85 15 96 4

Footnotes:

(1) For each type of plan, denominator is all workers with access to that type of plan.
U.S. BUREAU OF LABOR STATISTICS COMPENSATION AND WORKING CONDITIONS

Page 7

Table 3. Percent of workers with access to retirement benefits and contributory status, State and local government

workers, National Compensation Survey, March 2008

With access to at least one

retirement plan

With access to at least one retirement plan that has

mandatory or voluntary employee contribution

All workers 92 84

Worker characteristics

Management, professional, and related 94 85

Professional and related 94 86

Teachers 94 85

Primary, secondary, and special

education school teachers 98 87

Service 86 78

Protective service 92 82

Sales and office 93 85

Office and administrative support 94 86

Full time 99 90

Part time 52 49

Union 98 88

Nonunion 87 80

Establishment characteristics

Education and health services 94 86

Educational services 94 85

Elementary and secondary

schools 94 84

Junior colleges, colleges, and

universities 91 88

Health care and social assistance 94 90

Hospitals 96 92

Public administration 91 81

State government 96 93

Local government 91 80

U.S. Bureau of Labor Statistics | Division of Information and Marketing Services, PSB Suite 2850, 2 Massachusetts Avenue, NE Washington, DC

20212-0001 | www.bls.gov/OPUB | Telephone: 1-202-691-5200 | Contact Us