The Impact of Defined-Benefit Pension Plans

Pension Spending Supports 6.2 Million Jobs, $943 Billion in Economic Output Nationwide (The National Institute on Retirement Security)

Pensionomics 2014: Measuring the Economic Impact of Defined Benefit Pension Expenditures reports the national economic impacts of public and private pension plans, as well as the impact of state and local plans on a state-by-state basis. The study measures the economic ripple effect of retiree spending of pension benefit income, which typically is a stable source of income that lasts through retirement…

  

This biennial study by the National Institute on Retirement Security finds that jobs supported by pension expenditures in 2012 paid nearly $307 billion in labor income. The analysis indicates that pension spending by retirees supported some $135 billion in tax revenue at the local, state and federal levels.  

Pensionomics 2014 includes a business and a retiree profile to demonstrate the importance of pensions to retirees, businesses in the economy and government coffers. The study also calculates that for 2012:  

Nearly $477 billion in pension benefits were paid to 24 million retired Americans, including:

• $228.5 billion paid to some 9.0 million retired employees of state and local government and their beneficiaries (typically surviving spouses);
• $70.7 billion paid to some 2.5 million federal government retirees and beneficiaries; and
• $175.6 billion paid to some 12.7 million private sector retirees and beneficiaries.

Expenditures made out of those payments collectively supported:

• 6.2 million American jobs that paid nearly $307 billion in labor income;
• $943 billion in total economic output nationwide;
• $555 billion in value added (GDP); and
• $135 billion in federal, state, and local tax revenue.

Pension expenditures have large multiplier effects:

• Each dollar paid out in pension benefits supported $1.98 in total economic output nationally; and
• Each taxpayer dollar contributed to state and local pensions supported $8.06 in total output nationally. This represents the leverage afforded by robust long-term investment returns and shared funding responsibility by employers and employees.

The largest employment impacts occurred in the food services, real estate, health care, and retail trade sectors.

The study is authored by Nari Rhee, Ph.D.., NIRS manager of research. It was conducted using the most current data available from the U.S. Census Bureau and IMPLAN, an input-output modeling software widely used by industry and governments analysts.

The National Institute on Retirement Security is a non-profit organization established to contribute to informed policymaking by fostering a deep understanding of the value of retirement security to employees, employers, and the economy through national research and education programs.