Brief State Pension Reforms: Are New Workers Paying for Past Mistakes?
Richard W. Johnson, C. Eugene Steuerle, Caleb Quakenbush
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When state pension plans are underfunded, someone eventually has to pay for the shortfall. Many recent reforms designed to improve plan finances shift burdens to the young, particularly by making many new employees net contributors torather than beneficiaries ofthese plans. Using New Jersey as a case study, this brief shows how states require higher levels of employee contributions, invest them in somewhat risky assets, and then, like a bank or financial intermediary, pay back many employees less in benefits than what they contributed and expected to earn on those contributions.
Research Areas Wealth and financial well-being Aging and retirement Taxes and budgets
Tags Economic well-being Older workers Pensions Wages and nonwage compensation State and local tax issues Retirement policy
Policy Centers Income and Benefits Policy Center