State and Local Retirement Plans in the United States

State and Local Retirement Plans in the United States

Robert L. Clark, Lee A. Craig and John Sabelhaus

State and Local Retirement Plans in the United States explains how economic and political events have shaped the development of pension plans in the last century, and it argues that changes in the structure and generosity of these plans will continue to shape policy and funding in the future. It also brings to bear a new rationale to the policies behind public sector pension plans. The authors use the history of how early public pension plans were established, how they matured and how they have grown in generosity to analyse what changes may be expected in years to come. Unique in its scope, this comprehensive history of the development of public sector pension plans in the United States during the twentieth century expands upon current ideas relating to the changing economic environment, the passage and evolution of social security, and the expansion of the public sector.

Chapter 4: State and Local Pension Plans and the Evolution of Social Security: 1940–1975

Robert L. Clark, Lee A. Craig and John Sabelhaus

Subjects: economics and finance, public sector economics, social policy and sociology, ageing


4. State and local pension plans and the evolution of Social Security: 1940–75 The Great Depression marked a turning point in the history of public sector pensions in the United States, with the federal government providing a broad-based, pension plan for non-government workers for the first time. As Chapters 2 and 3 reveal, since the late nineteenth century, large municipalities had been creating retirement plans for their police officers, firefighters and school teachers. In the two decades immediately preceding the Depression, several states created plans for their school teachers, and a few states also created plans for their other employees. In addition, uniformed military personnel had universal coverage from the late nineteenth century, and in 1920 the federal government had created a pension plan for federal workers. On a totally separate track, as part of the progressive movement, in the 1920s a small number of states had begun experimenting with old-age pension and/or welfare plans for their citizens as a replacement for their poorhouses. While almost all of the non-worker plans were means-tested at the time, their supporters hoped that the plans would eventually evolve into universal old-age pension plans. The Depression affected the country’s diverse set of retirement plans in different ways. The federal government’s plans for its employees were never in jeopardy and underwent only minor changes during the 1930s. Similarly, the state plans never faced serious financial constraints, and the number of states offering pension plans actually increased during the Depression decade. However, the crisis in...

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