Pension Plan Choice in the Pubic Sector: The Case of Michigan State Employees (Forum on Pensions‪)‬

INTRODUCTION Public sector pension plans are a large, influential segment of the pension market. Pension plans for state and local employees in the U.S. include almost 13 million workers, pay benefits to more than five million beneficiaries (Mitchell et al., 2001) and control $2.4 trillion in assets in 1998. Public plans include employees of state governments, local governments, teachers, police and firefighters, members of the judiciary and legislature. They vary widely with respect to governance and investment policy, but most have a similar structure--they are defined benefit (DB) plans. That is, the benefit received at retirement by workers who have vested (met minimum service and age requirements) depends on age, years of service, and salary. The pension pays an annuity, usually with a survivor benefit, until death. Most include incomplete cost-of-living increases.