Chapter 1: Public Pension Plans in the Twentieth Century
Public sector pensions have a long, though somewhat uneven, history in the United States. The Continental Congress created pension plans for its military personnel during the American Revolution, and the United States perpetuated these plans after the ratification of the Constitution. Yet by 1900, there was still no pension plan for federal civil servants, and no state offered a retirement plan to its employees. Only a few of the nation’s larger cities provided retirement plans to their workers, and these plans were typically exclusive to teachers, firefighters and police officers. In 1911, Massachusetts became the first state to establish a statewide public employee pension plan.1 By the mid-1970s, every state had done so. In the decade following the creation of the Massachusetts’ plan, Congress created a plan for federal civil servants. The pace at which public pension plans spread throughout the country was relatively slow during the first third of the twentieth century and uneven with respect to coverage. Congress passed the Federal Employees Retirement Act in 1920, creating a comprehensive pension plan for federal civil servants. By 1930, more than 20 states maintained a pension plan for public school teachers, but only eight states had a plan for their other employees. This situation changed following the Great Depression, as the expansion of state plans accelerated dramatically. The passage of the Social Security Act in 1935, which initially excluded state and local workers from participating in Social Security, provided an impetus for the states to establish retirement plans for their...
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