The Future of Public Employee Retirement Systems

Edited by Olivia S. Mitchell and Gary Anderson

Pension Research Council Series

As pension funds increasingly come under pressure, this volume provides a timely reassessment of the situation in the public sector
Presents the latest research, informed by current practice and thinking, from some of the leading pensions scholars, consultants, and practitioners
Considers the costs, benefits, and future of public pensions in the light of financial and demographic challenges
International coverage, with particular focus on the US, Japan, Canada, and Germany

The Future of Public Employee Retirement Systems

Edited by Olivia S. Mitchell and Gary Anderson

Pension Research Council Series

Description

People covered by public pensions are often the subject of "pension envy": that is, their benefits might seem more generous and their contributions lower than those offered by the private sector. Yet this book points out that such judgments are often inaccurate, since civil servants hold jobs with few counterparts in private industry, such as firefighters, police, judges, and teachers. Often these are riskier, dirtier, and demand more loyalty and discretion than would be required of a more mobile labor force in the private sector. The debate challenges traditional ideas about how the public employee labor contract is structured and raises questions about how such employees are attracted to the public sector, retained and motivated on the job, and retired, via an entire compensation package of wages and benefits. Authors explore aspects of these schemes, addressing the cost and valuation debate, along with the political economy of how public pension asset pools are perceived and managed, an increasingly important topic in times of global financial turmoil. The discussion also explores ways that public pensions can be strengthened in the US, Japan, Canada, and Germany.

The volume captures a vigorous debate currently underway by academics, financial experts, regulators, and plan sponsors, all seeking to define a new future for public retirement systems. It will be of substantial interest to a wide range of readers, since public sector employees and their representatives will naturally find the comparisons and arguments over valuation of keen interest. Public pension administrators and policymakers seeking an explanation of what makes these plans so costly will gain a new understanding of how the arguments stack up. Private sector employers and plan sponsors can learn much from efforts to reform these retirement systems in states and countries around the world. Finally, investors and the taxpaying public more generally may be at risk to cover these long-term promises, so it behooves them to pay close attention to the financing and investment practices of these plans, along with their valuation.

This volume represents an invaluable addition to the Pension Research Council / Oxford University Press series as it includes actuarial, economic, and financial perspectives making it useful for academics, retirement plan administrators, and public employees wishing to understand the challenges facing public pensions.

The Future of Public Employee Retirement Systems

Edited by Olivia S. Mitchell and Gary Anderson

Pension Research Council Series

1. The Future of Public Employee Retirement Systems, Olivia S. Mitchell
Part I: Costs and Benefits of Public Employee Retirement Systems
2. Estimating State and Local Government Pension and Retiree Health Care Liabilities, Stephen T. McElhaney
3. The Case for Marking Public Plan Liabilities to Market, Jeremy Gold and Gordon Latter
4. Between Scylla and Charybdis: Improving the Cost Effectiveness of Public Pension Retirement Plans, M. Barton Waring
5. Public Pensions and State and Local Budgets: Can Contribution Rate Cyclicality Be Better Managed?, Parry Young
6. Benefit Cost Comparisons Between State and Local Governments and Private Industry Employers, Ken McDonnell
7. Administrative Costs of State Defined Benefit and Defined Contribution, Edwin C. Hustead
8. Thinking About Funding Federal Retirement Plans, Toni Hustead
Part II: Implementing Public Retirement System Reform
9. Reforming the German Civil Servant Pension Plan, Raimond Maurer, Olivia S. Mitchell, and Ralph Rogalla
10. The Outlook for Canada's Public Sector Employee Pensions, Silvana Pozzebon
11. Unifying Pension Schemes in Japan: Toward a Single Scheme for Both Civil Servants and Private Employees, Junichi Sakamoto
12. Redefining Traditional Plans: Variations and Developments in Public Employee Retirement Plan Design, Keith Brainard
13. Defined Contribution Pension Plans in the Public Sector: A Benchmark Analysis, Roderick B. Crane, Michael Heller, and Paul J. Yakoboski
Part III: The Political Economy of Public Pensions
14. The Evolution of Public Sector Pension Plans in the United States, Robert L. Clark, Lee A. Craig, and Neveen Ahmed
15. Pension Fund Activism: The Double-Edged Sword, Brad M. Barber
16. The New Intersection on the Road to Retirement: Public Pensions, Economics, Perceptions, Politics, and Interest Groups, Beth Almeida, Kelly Kenneally, and David Madland

The Future of Public Employee Retirement Systems

Edited by Olivia S. Mitchell and Gary Anderson

Pension Research Council Series

Author Information

Olivia S. Mitchell is the International Foundation of Employee Benefit Plans Professor of Insurance and Risk Management, the Executive Director of the Pension Research Council, and the Director of the Boettner Center on Pensions and Retirement Research at the Wharton School. Concurrently Dr. Mitchell is a Research Associate at the National Bureau of Economic Research and a Co-Investigator for the AHEAD/Health and Retirement Studies at the University of Michigan. Dr. Mitchell's main areas of research and teaching are private and public insurance, risk management, public finance and labor markets, and compensation and pensions, with a US and an international focus. She received the B.A. in Economics from Harvard University and the M.A. and Ph.D. degrees in Economics from the University of Wisconsin-Madison.

Gary Anderson is a consultant on public pension issues; previously he served as Executive Director of the Texas Municipal Retirement system which covers municipal employees and retirees for many Texas cities. He is also an Advisory Board member of Wharton's Pension Research Council, and he served with the National Association of State Retirement Administrators and the Government Finance Officers Association. He received the BA in Political Science from Texas A&M University, and the MA in Public Management from the University of Houston-Clear Lake City.

Contributors:

Neveen Ahmed, doctoral candidate in Economics, North Carolina State University,
Beth Almeida, Executive Director, National Institute on Retirement Security,
Gary Anderson, public pension consultant,
Brad M. Barber, Professor of Finance, Graduate School of Management, UC Davis,
Keith Brainard, research director, National Association of State Retirement Administrators,
Robert L. Clark, Professor of Economics and Professor of Management, Innovation, and Entrepreneurship, North Carolina State University,
Lee A. Craig, Alumni Distinguished Professor of Economics, North Carolina State University,
Roderick B. Crane, Director of Institutional Client Services, TIAA-CREF,
Jeremy Gold pension finance consultant,
Michael Heller, Vice President of Actuarial Consulting Services, TIAA-CREF,
Edwin C. Hustead, former Senior Vice President in charge of the Arlington, Virginia Hay Group actuarial practice and all Hay governmental actuarial and benefits consulting,
Toni Hustead, former Chief of the Veterans Affairs and Defense Health Branch, US Office of Management and Budget, Executive Office of the President,
Kelly Kenneally, communications advisor to the National Institute on Retirement Security,
Gordon Latter, head of Pension and Endowment Strategy, Merrill Lynch Global Securities Research and Economics Group,
David Madland, Director of the Work/Life Program, Center for American Progress,
Raimond Maurer, endowed Chair of Investment, Portfolio Management, and Pension Finance, Finance Department, Goethe University of Frankfurt,
Ken McDonnell, Program Director, American Savings Education Council, Washington, DC,
Stephen T. McElhaney, senior public sector actuary, Mercer,
Olivia S. Mitchell, Executive Director of the Pension Research Council, Wharton School, University of Pennsylvania ,
Silvana Pozzebon, Associate Professor, Department of Human Resources Management, HEC Montréal (École des Hautes Études Commerciales de Montréal),
Ralph Rogalla, Research Associate, Department of Finance, Goethe University of Frankfurt, Junichi Sakamoto, Chief Adviser to the Pension Management Research Group, Nomura Research Institute,
M. Barton Waring, Chief Investment Officer for Investment Strategy and Policy, Barclays Global Investors, Emeritus,
Paul J. Yakoboski, Principal Research Fellow, TIAA-CREF Institute,
Parry Young, independent consultant on pension and other postemployment benefit issues related to US state and local governments.