Hostname: page-component-586b7cd67f-g8jcs Total loading time: 0 Render date: 2024-11-22T07:39:02.381Z Has data issue: false hasContentIssue false
  • English
  • Français

Retirement choices by state and local public sector employees: the role of eligibility and financial incentives

Published online by Cambridge University Press:  28 January 2019

Leslie E. Papke
Leslie E. Papke*
Affiliation:
Department of Economics, Michigan State University, 486 West Circle Drive, East Lansing, MI 48824
*
*Corresponding author. Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

I analyze the effects of state public pension parameters on the retirement of public employees. Using a panel data set of public sector workers from 12 waves of the Health and Retirement Study, I model the probability of retirement as a function of pension wealth at early and normal retirement eligibility and Social Security coverage in the public sector job. I find that becoming eligible for early retirement, or receiving an early-out offer, significantly increases the probability of retiring. I do not find any effect of retirement wealth levels. These findings suggest that state legislative action to affect retirement decisions and reduce future pension costs would be most effective operating through plan eligibility rules and early-out incentives.

Keywords

Health and Retirement Studypublic pensionsstate and local pension policyretirementH75H72J26
Type
Article
Information
Journal of Pension Economics & Finance , Volume 18 , Special Issue 4: Incentives and Limitations of Employment Policies on Retirement Transitions , October 2019 , pp. 515 - 528
Copyright
Copyright © Cambridge University Press 2019 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Asch, B, Haider, SJ and Zissimopolos, J (2005) Financial incentives and retirement: evidence from federal civil service workers. Journal of Public Economics 89, 427–440.Google Scholar
Backes, B, Goldhaber, D, Grout, C, Koedel, C, Ni, S, Podgursky, M, Xiang, PB and Xu, Z (2016) Benefit or burden? On the intergenerational inequity of teacher pension plans. Educational Researcher 45, 367–377.Google Scholar
Beshears, JJ, Choi Laibson, D and Madrian, B (2011) Behavioral economics perspectives on public sector pension plans, Journal of Pension Economics and Finance 10, 315–336.Google Scholar
Brown, K (2009) Teacher pensions and retirement in California. Paper presented at the National Center on Performance Incentives National Conference, Vanderbilt University, February.Google Scholar
Choi, JJ, Laibson, D, Madrian, BC and Metrick, A (2002) Defined contribution pension plans: Plan rules, participant decisions,and the path of least resistance. In Poterba, JM (ed.) Tax Policy and the Economy, vol. 16. Cambridge, MA: MIT Press, 67–113.Google Scholar
Choi, JJ, Laibson, D, Madrian, BC and Metrick, A (2003) Optimal defaults. The American Economic Review 93, 180–185.Google Scholar
Clark, RL, Hammond, RG, Morrill, MS and Vanderweide, D (2017) Annuity Options in Public Pension Plans: The curious case of Social Security leveling. NBER Working Paper No. 23262, March.Google Scholar
Coile, CC and Gruber, J (2007) “Future social security entitlements and the retirement decision. Review of Economics and Statistics 89, 234–246.Google Scholar
Costrell, RM and McGee, JB (2010) Teacher pension incentives, retirement behavior, and potential for reform in Arkansas. Education Finance and Policy 5, 492–518.Google Scholar
Costrell, RM and Podgursky, M (2009) Peaks, cliffs, and valleys: the peculiar incentives in teacher retirement systems and their consequences for school staffing. Education Finance and Policy 4, 175–211.Google Scholar
Doherty, KM, Jacobs, S and Madden, TM (2012) No One Benefits: How Teacher Pension Systems are Failing Both Teachers and Taxpayers. Washington, DC: National Council on Teacher Quality.Google Scholar
Feng, C, Butchart, A, Stolyarova, H, Nolte, M and Peticolas, B (2016) Pension Estimation Program Users Guide. HRS website: V. 3.1 April.Google Scholar
Fitzpatrick, MD (2015) How much are public school teachers willing to pay for their retirement benefits? American Economic Journal: Economic Policy 7, 165–188.Google Scholar
Fitzpatrick, MD (2018) Pension reform and return to work policies. NBER Working paper 25299, November.Google Scholar
Friedberg, L and Webb, A (2005) Retirement and the evolution of pension structure. Journal of Human Resources 40, 281–308.Google Scholar
Furgeson, J, Strauss, R and Vogt, W (2006) The effects of defined benefit pension incentives and working conditions on teacher retirement decisions. Education Finance and Policy 1, 316–48.Google Scholar
Giertz, JF and Papke, LE (2007) Pension funding and state government finances: back in the black or trouble ahead?, National Tax Journal 60, 305–323.Google Scholar
Government Accounting Office (2003) Social Security: Issues relating to the noncoverage of public employees. GAO-03-710T.Google Scholar
Government Accounting Office (2010) Social Security Administration: Oversight needed to ensure accurate treatment of state and local employees. GAO-10-938.Google Scholar
Gustman, AL and Steinmeier, TL (2000) Retirement Outcomes in the Health and Retirement Study. NBER Working Papke # 7588.Google Scholar
Gustman, AL, Steinmeier, TL and Tabatabai, N (2010), Pensions in the Health and Retirement Study. Cambridge, MA and London, England: Harvard University Press.Google Scholar
Gustman, AL, Steinmeier, TL and Tabatabai, N (2012), Enhancing Pension Data Files for Modeling Health and Retirement and for the HRS User Community: 1992 to 2006. Available at http://hrsonline.isr.umich.edu.Google Scholar
Gustman, AJ, Steinmeier, TL and Tabatabai, N (2013) The Social Security Windfall Elimination and Government Pension Offset Provisions for Public Employees in the Health and Retirement Study. NBER Working Paper 19724, December 2013.Google Scholar
Health and Retirement Study, Public Use Dataset (2016) Produced and Distributed by the University of Michigan with funding from the National Institute on Aging. Available at http://hrsonline.isr.umich.edu.Google Scholar
Hurd, M (1990) Research on the elderly: economic status, retirement, and consumption and savings. Journal of Economic Literature 28, 565–637.Google Scholar
Jenkins, SP (1995) Easy estimation models for discrete-time duration models. Oxford Bulletin of Economics and Statistics 57, 129–138.Google Scholar
John, JA and Draper, NR (1980) An alternative family of transformations. Applied Statistics 29, 190–197.Google Scholar
Kim, D, Koedel, C, Ni, S, Podgursky, M and Wu, W (2017) Pensions and Late-Career Teacher Retention.Google Scholar
Litwok, D and Papke, LE (2013) Interstate differences in pension vesting rules and K-12 teacher experience Proceedings of the National Tax Association, November 21–23.Google Scholar
Maestas, N (2010) Back to work: expectations and realizations of work after retirement. Journal of Human Resources 45, 718–748.Google Scholar
Martel, L and Petrini, A (2014) Pensions and Retirement Plan Enactments in 2013 State Legislatures,” National Conference of State Legislatures.Google Scholar
Morrill, MS and Westall, J (2018) Social security and retirement timing: evidence from a National Sample of Teachers, draft, September 29.Google Scholar
Munnell, A, Aubry, J-P, Hurwitz, J and Quinby, L (2011), Can State and Local Pensions Muddle Through. Center for Retirement Research, March, Number 15.Google Scholar
Munnell, AH, Aubry, J-P and Sazenbacher, GT (2015) Recruiting and Retaining High-Quality State and Local Workers: Do Pension Matter? Center for Retirement Research, January, Number 1.Google Scholar
Novy-Marx, R and Rauh, JD (2009) The liabilities and risks of state-sponsored pension plans. Journal of Economic Perspectives 23, 191–210.Google Scholar
Samuelson, W and Zeckhauser, R (1988) Status quo bias in decision making. Journal of Risk and Uncertainty 1(1), 7–59.Google Scholar
Shoven, JB and Slavov, SN (2014) The role of retiree health insurance in the early retirement of public sector employees. Journal of Health Economics 38, 99–108.Google Scholar
Snell, R (2012) State Pension Reform, 2009–2011. National Conference of State Legislatures, March.Google Scholar
The Pew Center on the States (2010) The trillion dollar gap: Unfunded state retirement systems and the roads to reform, February.Google Scholar
The Pew Charitable Trusts (2018) The State Pension Funding Gap: 2016, April.Google Scholar
Wisconsin Legislative Council (2013) 2012 Comparative Study of Major Public Employee Retirement Systems.Google Scholar
Wooldridge, JM (2010), Econometric Analysis of Cross Section and Panel Data. Cambridge, MA and London, England: MIT Press.Google Scholar