Few State Retirement Programs Had Exactly the Same Component Mix as FERS or CSRS

All of the 50 state retirement programs had two or more of the four design components but few of them had all of the same design components as FERS or CSRS. A majority of states included three of the design components, but these were not the same components included in either FERS or CSRS. The lack of employer contributions distinguished these programs from FERS, and the inclusion of Social Security coverage distinguished them from CSRS. All States Made Design Changes to Their Retirement Programs Since They Were Established

All states have in some way changed the design components of their retirement programs since the programs were established. Six states have never added Social Security coverage to their retirement programs. Of the 48 state retirement programs with a DB component, officials representing 21 states told us that they had considered dropping their DB component in favor of a program consisting of a DC component with an employer contribution and Social Security. As shown in table 5, reducing government costs, enhancing portability, and/or lobbying by special interests or group(s) were among the reasons cited for considering such a change. The most common reasons officials cited for their states not making the change to a DC plan during their past legislative sessions were that (1) studies done by the states showed there was no need to change, (2) further study was needed, (3) the state’s labor unions opposed the change, and/or (4) there was a lack of interest or support. Officials representing the remaining 27 state retirement programs with a DB component told us that their states had never considered dropping the DB component. The most common reasons state officials gave for not considering the change from a DB to a DC plan were that (1) the DB component provided greater benefits, including survivor and disability benefits; (2) they regarded the DB plan as a better way to retain employees; and/or (3) there was little or no support for the change. These components are similar to the components found in the Civil Service Retirement System (CSRS). Does plan only include state general employees?
Why GAO Did This Study

GAO provided information on the: (1) design components of retirement programs that states offer to their general employees and compared them to the design components of the two principal retirement programs for federal employees; and (2) changes states have considered and made to their retirement programs.

What GAO Found

GAO noted that: (1) all states used two or more of the four design components, but few of their retirement programs had all of the same components as the Federal Employees' Retirement System (FERS) or the Civil Service Retirement System (CSRS); (2) the majority of states--35--included three components and differed by only one component from either FERS or CSRS; (3) the lack of employer contributions to defined contribution (DC) plans distinguished these programs from FERS, and the inclusion of social security coverage distinguished them from CSRS; (4) in the final analysis, three state programs had the same components as FERS and six had the same components as CSRS; (5) GAO's review showed that all states have in some way changed the design components of their retirement programs since the programs were established; (6) developments in federal law that might enhance employee benefits prompted most of these changes; (7) officials representing 21 of the 48 state retirement programs with a defined benefit (DB) component told GAO that their states had recently considered dropping their DB plan component in favor of a program consisting solely of a DC component with an employer contribution and social security; (8) however, only two states have no DB plan, and one of these states--Michigan--recently dropped its DB plan and switched to a DC plan with an employer contribution for its state-sponsored retirement benefits; (9) officials from the 21 states cited reducing government costs, enhancing portability, and lobbying by special interests as the major reasons for considering such a change; (10) they also cited a number of reasons for not dropping their DB plans, the most common were that: (a) studies showed no need for the change; (b) further study was needed; (c) labor unions opposed the change; or (d) there was lack of interest or support for the change; (11) officials representing the other 27 state programs told GAO that their states had never considered dropping their DB component; and (12) the most common reasons state officials gave for not considering such a change were that: (a) the DB component provided greater benefits, including survivor and disability benefits; and (b) they regarded the DB plan as a better way to retain employees.