Pension and Health Benefits for Public-Sector Workers

In the United States, retirement and health benefits make up a substantial proportion of the total compensation of public-sector workers. This chapter explores the history and the main characteristics of such retirement and health benefits, as they have developed in the United States. As shown, on average, these benefits tend to be more valuable than those provided to private-sector workers. Public-sector workers are more likely than their private-sector counterparts to be covered by a retirement plan and by employer-provided health insurance. Public-sector pension plans are more likely to be defined benefit plans than are private-sector plans. Many public-sector employers have promised their employees more in benefits than they have set aside to pay for those benefits. Estimates suggest that the 2,670 federal, state, and local retirement plans currently in operation are underfunded collectively by as much as $5 trillion, and public-sector health plans are probably underfunded by roughly $1 trillion.