Accrual Measures of Pension-Related Compensation and Wealth of State and Local Government Workers
This paper develops a method to convert the normal costs and actuarial liabilities published by state and local government retirement systems for their defined benefit pension plans to measures consistent with national income accounting principles. It also standardizes the measures using a common discount rate. The method is applied to data for the years 2000 to 2006 to generate a set of national and state estimates of employer normal costs and liabilities which are then used to improve the estimates of compensation and property income in the National Income and Product Accounts (NIPA). Using a 6% discount rate, our estimated liability of state and local government retirement systems is about 4% lower than the published liability for 2006 and our estimate of normal costs is about 48% higher. Adopting these estimates would add $105 billion (or about 1.0%) to personal income in 2006. Revisions to state estimates of personal income would range from a 0.7% reduction in West Virginia to a 2.3% increase in New Jersey.
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- Burt S. Barnow & Ronald G. Ehrenberg, 1979. "The Costs of Defined Benefit Pension Plans and Firm Adjustments," The Quarterly Journal of Economics, Oxford University Press, vol. 93(4), pages 523-540.
- Ippolito, Richard A, 1985. "The Labor Contract and True Economic Pension Liabilities," American Economic Review, American Economic Association, vol. 75(5), pages 1031-43, December.
- Robert Novy-Marx & Joshua D. Rauh, 2008. "The Intergenerational Transfer of Public Pension Promises," NBER Working Papers 14343, National Bureau of Economic Research, Inc.
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