Some jobs become increasingly taxing as one ages. Airline pilots and air traffic controllers, for example, are subject to mandatory retirement ages. While not subject to mandatory retirement ages, many police officers and firefighters retire from their public safety job at earlier ages due to the dangerous and physically demanding nature of the work. It’s not in the public interest to have firefighters of an advanced age running into a burning building. Fortunately, public safety professionals typically have a defined benefit (DB) pension so they can retire at an appropriate age without worrying about their financial security.
Pensions have long been a part of a career in public safety. In fact, the first public pension plan in the U.S. was offered to police officers in New York City in 1857. Pensions became the norm for police officers and firefighters over the following hundred years as more cities and states established more plans. Pensions make especially good sense for public safety careers because they help with the “Three Rs” of workforce management: recruitment, retention, and retirement.
Most people who sign up for a public safety career do so with a desire to serve their community, but they also recognize that these jobs come with benefits that reflect the risks of the work being performed. The reality of being a firefighter or a police officer is that one could be seriously injured or killed on the job any day. Pensions include important death and disability benefits that provide some measure of support in the event of a dangerous incident on the job.
Several years ago, the National Institute on Retirement Security (NIRS) surveyed police officers and firefighters for their views on retirement and their pension benefits. The findings were overwhelmingly positive in favor of pensions. The vast majority of both firefighters and police officers agreed that pensions are a strong tool for employee recruitment and retention. And the data backs up their sentiment.
In fact, a new report from NIRS examines the role of pensions in supporting a stable public safety workforce. In an analysis of data from 28 nationally representative public safety pension plans the report found that 52 percent of new public safety hires, assuming they are hired at age 25, are expected to retire from their pension plan. Or, put another way, the median 25-year old new hire is expected to stay and serve their community until retirement.
This is an extraordinarily high number and far beyond anything comparable in the private sector. It has long been the case that the public sector has longer job tenures than the private sector, typically about eight years rather than four, but public safety seems to be unique in the length of tenures.
It has long been the case that the public sector has longer job tenures than the private sector, … [+]
The report also examines the turnover rate against years of service. Turnover is somewhat higher during the first five years, which is typical of any job. But after five years, turnover remains remarkably low until retirement eligibility is reached, at which point the turnover rate spikes as long-tenured workers retire from the plan. This is what one would expect to see if workers were following the incentive structure that these benefits create. This indicates that the pension plan is having the desired workforce management effect. That is, pension help these workers, who often sacrifice much to serve their communities, transition into retirement at the appropriate time.
Pensions have the desired workforce management effect, helping public safety employees transition … [+]
These strong retention impacts matter for local communities, especially when it comes to public safety. Recent years have demonstrated the importance of maintaining a robust public safety workforce, and the nationwide shortage of police officers and firefighters has harmed the level of service that local communities expect. The recent experiences of states that made significant changes to their public pension plans underscores this point.
For example, Alaska closed both of its statewide public pension plans in 2006, almost exactly 18 years to the day of this writing. Most public safety professionals in Alaska participate in the Public Employees Retirement System, which for the past 18 years has been a defined contribution (DC)-only plan. Moreover, most public employees in Alaska don’t participate in Social Security, so they will have no guaranteed income in retirement.
Among state and local government workers in Alaska, there is a natural experiment playing out. Workers at the same police station, fire department, or other public workplace are behaving differently based on which plan they participate in. It is unusual to have data like this, which compares the behavior of workers who have the same boss, serve the same community, and are working under the same pay provisions. Despite the similarities, the data indicate that vested workers in the DB plan are providing between 50 to 100 percent more service across the various job categories than those participating in the DC plan.
The inability to offer a pension to public safety professionals in Alaska has led to crisis levels of staffing shortages. As an example, the city of Fairbanks does not have police officers on patrol between 8 am and 12 pm due to inadequate staffing. The borough assembly of another jurisdiction called on citizens to arm themselves due to insufficient police presence. This represents a failure to provide one of the fundamental services of government – public safety. Clearly, public safety professionals in Alaska understand that committing to these dangerous jobs without the financial security and protections offered by a pension makes little sense.
The inability to offer a pension to public safety professionals in Alaska has led to crisis levels … [+]
Even in Rhode Island, which moved from a pension plan to a hybrid DB-DC plan, employee turnover has increased for police officers and firefighters in more recent years following the change in plan design.
In Rhode Island, employee turnover has increased for police officers and firefighters in more recent … [+]
Retirement benefits are a critical component of a public safety career. Retirement plans incentivize and reward dedicated careers by providing assurance that even if a worker is seriously injured or killed on the job, there will be support and a reliable source of income for them and their survivors. Moreover, pension plans facilitate an orderly transition into retirement after a career of performing physically demanding work. As communities around the U.S. debate the best ways to maintain a robust public safety workforce during the current tight labor market, they should not overlook the value of a pension.