The majority of public pension plans made several reforms following the financial crisis. A December brief by the Center for State and Local Government Excellence examines how, why and to what extent state and local governments have enacted these changes:
- Four percent of state plans and 57% of large local plans have cut benefits and/or raised employee contributions to curb rising costs.
- While the majority of state and local plans reduced benefits for new employees only, 25% also cut benefits for current employees.
- The two most common benefit reductions for current employees were increases in employee contributions and reductions to the cost of living adjustment (COLA).
- New employees experienced the greatest reductions in core benefits, most commonly: 1) increases in the age and tenure required to claim benefits, and 2) reductions in the benefit multiplier and a lengthening of the period used to calculate final average salary.
- Plans more likely to make cuts had the highest annual required contribution (ARC) as a percentage of revenue or had lower employee contributions.