The retirement playing field is not level for the largest segments of public sector workers when it comes to ensuring that they have a path to retirement income security.
In a comprehensive assessment of the quality of benefits being offered to public sector workers nationwide, a new report from Equable Institute found a retirement inequity between full career workers versus serving short (10 years or less) and medium (10 to 20 years of service) career workers.
The review found that while the majority of full career workers are being served well and provided with adequate retirement income, the other groups fell short. Short- and medium-career employees represent the largest segment of public sector workers at a combined 77%.
“Public workers are individuals with unique needs, just like everyone else. It is important that their retirement benefits are working well for them, no matter how long they work in public service,” said Equable Institute Executive Director Anthony Randazzo.
Falling short
Only 11 out of all 335 state retirement plans offered to new members are serving short-term workers well, which includes pension, defined contribution, guaranteed return, and hybrid plans. This is a concerning trend given that these workers make up around half of the public sector workforce at any given time.
Many defined contribution plans and hybrid plans could work for those serving a decade or less, however, most currently lack adequate contribution rates from members and employers. As a result, there is a shortcoming in the quality of benefits that these plans actually provide.
Pension plans are not serving medium-term workers well either, despite the fact that these individuals are putting in up to two decades of public service. Only 24 out of 220 state pension plans are providing sufficient benefits to put their members on a path to retirement income security by the time they reach two decades of service. That means a whopping 89% of pension plans are not working well for these workers.
Equable’s Randazzo says the public sector retirement plans should prioritize putting their members on a path to adequate retirement income security, which they define as being provided with at least 70% of pre-retirement income by age 67.
Lynn Brackpool Giles is a contributing editor to 401(k) Specialist. Giles is a former Managing Director of Communications and Consumer Services for the Financial Planning Association (FPA), where she oversaw all corporate, legislative, and consumer communications. In her current journalistic practice, she is a frequent contributor to numerous financial services industry publications.
