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Contributions

Public pensions are financed primarily from two sources: contributions and investment earnings. Because nearly all state and local retirement systems are shared-financing arrangements, contributions come from both employees and employers.

Employer Contributions

According to the U.S. Census Bureau, in FY 20, employer pension contributions accounted for 5.2 percent of all state and local government direct general spending (an amount that excludes intergovernmental transfers). More...

State and Local Spending on Public Pensions, FY 22

Employee Contributions
 

For the vast majority of employees of state and local government, participation in a public pension plan and contributing toward the cost of the pension are mandatory terms of employment. Employee contributions provide a reliable and predictable stream of revenue to public pension funds and typically are based on a percentage of salary as specified in statute, most commonly between four and eight percent. More...

Contributions Over Time

Over time, investment earnings finance a majority of the cost of a typical public pension plan. According to the U.S. Census Bureau, for the 30 years 1992 through 2021, investment earnings accounted for 64 percent of public pension revenues; employer contributions made up approximately 25 percent, and employee contributions were around 11 percent.
 

Public Pension Sources of Revenue, 1996-2025


 

A recent study, Pensionomics 2025: Measuring the Economic Impact of DB Pension Expenditures, finds that pension benefits have a significant economic impact: 6.8 million American jobs, $1.5 trillion in economic output, adding more than $224.3 billion in combined revenue to local, state, and federal governments.

NASRA Resources

Other Resources


Become A Member

Becoming a member of NASRA offers a unique opportunity to join a community committed to the sound, efficient, and innovative stewardship of public retirement systems. Membership connects you with a network of professionals and experts, providing valuable insights into managing public retirement systems with a focus on sustainability and risk-averse strategies.

By joining NASRA, you gain the tools and resources to enhance the management of public retirement systems, ensuring their long-term success and reliability for generations to come.

What's New at NASRA: Government Spending Issue Brief

NASRA’s March 2026 update on government spending makes a basic but important point: public pension benefits are not paid out of a government’s day-to-day operating budget. They are paid from trust funds that employees and employers contribute to during an employee’s working years. Those trusts distribute more than $400 billion each year to retirees and beneficiaries in communities across the country. On a national basis, employer contributions to pension trusts in FY 2023 equaled 5.16 percent of direct general spending by state and local governments, which shows that pension contributions remain a limited share of overall public spending even though the level varies from one state to another. 
The brief also shows that pension costs should be viewed in the context of the changes governments have made over the past 15 years to strengthen plan funding. Following the 2008–09 market decline, nearly every state and many local governments adjusted contributions, benefits, or both to improve pension sustainability. More recent data show that employer contributions increased from FY 2022 to FY 2023, but pension spending as a share of total government spending remained broadly stable. The updated brief provides FY 2023 figures and also projects the aggregate pension spending rate for FY 2024, offering a useful snapshot of both current costs and the longer funding trend.