Economic Effects of Pensions

Studies reveal that public pension benefits have positive effects on local and state economies. In 2023, state and local government retirement systems in the U.S. distributed $175 billion more in benefits than they received in taxpayer-funded contributions. Personal income from state and local government pensions exceeds the personal income derived from the nation's farming, fishing, logging, and hotel/lodging industries combined. The expenditure of public pension benefits results in an economic impact that reaches every city and town of every state.

State and Local Studies

Analyses of the impact of public pension payments on their state's economy:


Taxation of Retirement Income

Forty-three states tax individual incomes, and most provide full or partial exclusions for retirement income. Retirement income is generally received in the form of pension benefits for state or local or private sector service, Social Security, or federal government or military benefits. Tax exclusions for retirement income vary among states and are influenced by factors including age, residency while receiving benefits, and marital status, among others. A compilation of state policies governing exclusions for retirement income can be accessed via the link below. 

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: Public Pension Investment Return Assumption Brief Updated

NASRA’s latest update to standing issue briefs, Public Pension Plan Investment Return Assumptionunderscores the critical role the investment return assumption plays in the financial health of public pension plans. Of all actuarial assumptions, it has the greatest impact on plan funding levels and cost. This brief traces how a decade of low interest rates and inflation, beginning in 2009, prompted many plans to reduce their long-term expected returns in line with more modest capital market projections. However, since inflation began rising in early 2021, the trend toward lowering return assumptions has largely paused. While reducing a plan’s assumed return can increase both costs and unfunded liabilities, setting this assumption is a careful, thorough process. It draws on expert input from actuaries and investment professionals and is guided by actuarial standards of practice.