The Effect of Government Pensions on Financial Well-Being
The past several decades have seen major changes in the nature of retirement benefits for workers, including pension programs for public-sector employees.
In 1986, the Federal Employees' Retirement System Act created a new three-tiered system (FERS) to replace the existing Civil Service Retirement System (CSRS), which had provided a traditional annuity benefit for federal government workers since 1920. The new system’s benefits include annuity payments from FERS and Social Security that are lower in total than the annuity under CSRS, as well as a defined-contribution component in the Thrift Savings Plan. This study examines this landmark reform’s effects on the financial outcomes of civilian personnel in the Department of the Army.
The researchers combined administrative personnel data from the Department of the Army with payroll data from the Department of Defense for all federal civilian employees hired by the Army between January 1, 1981, and December 31, 1987. To measure the effects of the pension program change on financial outcomes, they combined the administrative data with individual-level data from a national credit bureau.