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A Brief History of Public Pensions in the United States
The evolution of public pensions in the United States started as early as 1775-1776, when American colonies offered pensions to disabled militia members. The concept of organized pension systems took a more formal shape in 1857 with the establishment of the first municipal retirement system in New York City, providing lump sum disability benefits to police officers injured on duty.
Long before the federal government or states offered pension plans to workers, some large American cities created plans for specific groups of employees. By the early 20th century, these plans mainly covered police officers, firefighters, and teachers.
Massachusetts pioneered in 1911 by creating the first retirement plan for general state employees. By 1920, the Federal Employees Retirement Act laid the foundation for the Civil Service Retirement System, encompassing most U.S. federal government employees. From 1931 to 1950, half of the largest state and local pension plans in the U.S. were established, even as the 1935 Social Security Act initially left state and local employees out of coverage. This gap was bridged in 1950 when legislation allowed states to opt into Social Security.
The late 20th century, specifically from 1980 to 2000, saw a significant expansion in investment for public pensions, with total assets growing from $276 billion to $2 trillion. Now public pensions in the U.S. hold roughly $6.25 trillion to support public employee retirement benefits.
Since 2013, virtually every state materially modified public pension statutes to ensure the sustainability of their plans in the wake of the Great Recession, showcasing the adaptability and resilience of public pension systems through changing economic climates. According to the U.S. Census Bureau, there are over 5,000 public retirement systems across the country. Among significant facts: