An Introduction to Police and Fire Pensions

Local governments employ nearly all police officers and firefighters and, thus, are mainly responsible for their personnel costs. Pension and retiree health benefits (retirement benefits) for these public safety employees are designed to meet the challenges of a career in a physically demanding occupation, including lower-than-average retirement ages and an increased likelihood of workplace disability. But, news stories often present examples of public safety employees retiring with large pensions at relatively young ages alongside statistics of local government fiscal strains. The prevalence of these stories suggests the need for a careful examination of the retirement benefits that public safety retirees receive and the fiscal stress these commitments put upon local governments. This brief proceeds as follows. The first section documents that both pension and retiree health benefits for public safety workers are more costly than for other government workers, mainly because public safety workers retire earlier. The second section reports that, perhaps surprisingly, these public safety retirement benefits make up only a small share of total local government spending. The third section summarizes evidence suggesting that public safety employees could work longer, which may have implications for the design of their retirement benefits. The final section concludes that some local governments may decide to align public safety retirement benefits with employees’ ability to work at later ages, but benefit reforms would have limited impact on government expenditures – particularly given that any cut to benefits might need to involve an increase in wages to ensure the recruitment and retention of quality workers.