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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:

  • The largest 75 systems cover over 80% of all participants and assets
  • The biggest system has more than $500 billion in assets and serves over one and a half million active and retired members
  • The smallest systems hold less than $1 million in assets.
Public retirement systems are diverse, but they often share key principles, including:
  • Mandatory participation (all eligible employees are included)
  • Shared financing (costs are shared by employees and employers)
  • Benefit adequacy (providing enough for a secure retirement)
  • Pooled responsibility (investments & life expectancy experience are shared)
  • Lifetime benefit payouts (a retiree cannot outline their own benefit)

To learn more about public retirement systems in a specific state, click on the state or territory listed to the right.
 
 


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 Assumptions underscores 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.