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Publications by Richard W. Johnson for Retirement Policy


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Assessing Pension Benefits Paid under Pennsylvania's State Employees' Retirement System (Research Report)
Richard W. Johnson, Barbara Butrica, Owen Haaga, Benjamin G. Southgate

Pennsylvania’s pension plan for state employees receives a failing grade in the Urban Institute’s state and local pension plan report card, and ranks as the third-worst plan in the nation covering newly hired general state employees. The plan scores poorly because it is inadequately funded, it penalizes work at older ages by reducing lifetime benefits for older employees, and it provides few retirement benefits to short-term employees. Age-25 hires must work 32 years before they accumulate rights to future pension benefits worth more than their required plan contributions. Various pension reforms could distribute benefits more equitably across the workforce.

Posted: September 04, 2014Availability: HTML | PDF

Evaluating Retirement Income Security for Illinois Public School Teachers (Research Report)
Richard W. Johnson, Benjamin G. Southgate

The financial problems afflicting Illinois’s teacher pension plan have grabbed headlines. An equally important problem, though underappreciated, is that relatively few teachers benefit much from the plan. Long-serving teachers receive generous pensions, but only 18 percent of teachers remain employed for at least 25 years. Only 24 percent of those who complete at least five years of service receive pensions worth more than the value of their required plan contributions. Alternative plan designs, such as cash balance plans, could distribute benefits more equitably and put more teachers on a path to a financially secure retirement.

Posted: July 30, 2014Availability: HTML | PDF

Policy Brief: How Will Teachers Fare in Rhode Island's New Hybrid Pension Plan? (Summary)
Richard W. Johnson, Barbara Butrica, Owen Haaga, Benjamin G. Southgate

Hybrid retirement plans that combine defined benefit pensions with 401(k) type, defined contribution accounts can play important roles in the reform of public-sector pensions. Summarizing results from our longer report, this brief shows that most public school teachers in Rhode Island will earn more retirement income from the state’s new hybrid plan than they would have earned in the former stand-alone defined benefit plan. However, teachers with at least 25 years of completed service, who account for only one-quarter of the total employed by the state, will fare worse in the hybrid plan.

Posted: May 30, 2014Availability: HTML | PDF

How Will Rhode Island's New Hybrid Pension Plan Affect Teachers? (Research Report)
Richard W. Johnson, Barbara Butrica, Owen Haaga, Benjamin G. Southgate

In 2011 Rhode Island replaced the stand-alone defined benefit pension plan it provided to state employees with a hybrid plan that reduced the defined benefit component and added a 401(k)-type, defined contribution component. Although controversial, the new hybrid plan will boost retirement incomes for most of the state’s public school teachers. Our simulations show that two-thirds of newly hired teachers will earn more retirement benefits under the hybrid plan they would have earned under the old plan. Defined contribution plans—the dominant employer-sponsored retirement plan in the private sector—can play an important role in the reform of public-sector pensions.

Posted: May 30, 2014Availability: HTML | PDF

How Will State and County Government Employees Fare under Kentucky's New Cash Balance Pension Plan? (Research Report)
Richard W. Johnson, Benjamin G. Southgate

Kentucky recently replaced its traditional pension with a new cash balance plan for state and county employees hired after 2013. Employees who join the government payroll at relatively young ages and remain for no more than 25 years will accumulate more benefits in the cash balance plan than the traditional plan, while many of those with more years of service and hired at older ages will accumulate less. More than half of employees hired in 2014 who complete at least five years of service will fare better in the cash balance plan, which distributes benefits more evenly across the workforce.

Posted: April 30, 2014Availability: HTML | PDF

When Do State and Local Pension Plans Encourage Workers to Retire? (Research Brief)
Richard W. Johnson, Barbara Butrica, Owen Haaga, Benjamin G. Southgate

Traditional defined benefit pension plans that cover nearly all state and local government employees generally penalize work at older ages. In more than three-fifths of state-administered plans, employees hired at age 25 will receive lower lifetime pension benefits if they continue working after age 57 because retirement-eligible workers cannot receive benefit checks while they remain on the job. This reduction in benefits can create strong retirement incentives, which are hard to justify as the population ages and health gains and declines in physical work enable more older people to work. Well-designed public pension reforms could eliminate these work disincentives.

Posted: April 30, 2014Availability: HTML | PDF

How Long Must State and Local Employees Work to Accumulate Pension Benefits? (Research Brief)
Richard W. Johnson, Barbara Butrica, Owen Haaga, Benjamin G. Southgate

Traditional defined benefit pension plans that cover nearly all state and local government employees generally provide generous retirement benefits to long-tenured public servants but little retirement security to those with shorter tenures. Virtually every plan requires employee contributions. In half of those plans, employees must work at least 20 years before their future benefits are worth more than those contributions. Employees who separate earlier get nothing from their plan. Alternative designs like cash balance plans distribute benefits more equally across the workforce and allow employees who spend less than a full career in public service to accumulate retirement benefits.

Posted: April 30, 2014Availability: HTML | PDF

Do State and Local Pensions Lock In Mid-Career Employees? (Research Brief)
Richard W. Johnson, Barbara Butrica, Owen Haaga, Benjamin G. Southgate

State and local pension plans often allow employees who have completed 25 or 30 years of service to collect benefits regardless of their age, instead of waiting until they reach their plan’s normal retirement age. The lifetime value of their pension surges when they qualify for early benefits. Our analysis shows that on average, half the benefits employees have accumulated by their early 50s or late 40s are earned from a single year of work. These patterns create strong incentives for mid-career workers to remain on the payroll until they realize these windfalls, including those ill-suited for their jobs.

Posted: April 30, 2014Availability: HTML | PDF

Retirement Income Challenges in the Twenty-First Century (Testimony)
Richard W. Johnson

Richard Johnson describes the key challenges to retirement security in this testimony to the U.S. Senate's Special Committee on Aging. Although median retirement incomes will continue to rise in inflation-adjusted terms for generations retiring through the 2030s, increasing shares of Americans will see their living standards fall as they enter retirement because retirement incomes are not keeping pace with earnings. High out-of-pocket medical and especially long-term care costs pose the greatest threat to older Americans’ economic security. Income inequality is also growing at older ages and many seniors have difficulty turning retirement account balances into lifelong income.

Posted: September 25, 2013Availability: HTML | PDF

Income and Wealth of Older Adults Needing Long-Term Services and Supports (Testimony)
Richard W. Johnson

In his testimony before the federal Commission on Long-Term Care, Richard Johnson reports that most older adults who receive Medicaid-financed nursing home care have low incomes and very little wealth, both while on the program and for at least a decade before entering a nursing home. These results suggest that efforts to promote individual saving for long-term care may not move many people off Medicaid or reduce program costs because most Medicaid nursing home residents haven’t had the means to save much.

Posted: August 21, 2013Availability: HTML | PDF

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