Tuesday, May 1, 2012

NIRS Study: Pensions' Benefits Create Economic Activity

Just like there are two sides to every coin there are two sides to every pension dollar. All too often we get caught up in the details of one side of the pension equation – the contributions that the taxpayer-as-employer makes to their city’s public employees’ retirement plan – and we lose sight of the other side.

If you are asking, “What other side?” you’ve demonstrated the point.

The other side is that the pension benefits are distributed to millions of people across the United States, and they do things with that money. For most pension recipients, it’s not much, probably averaging in the $1,500-3,000 per month range, but when spread out over millions of people it adds up to a significant additive to our economy.

To prove this, the National Institute on Retirement Security conducted a major study of the after-effects of pensions, when the benefits are distributed to retirees. The NIRS study offers some very significant findings that most people wouldn’t think about or know because of their focus on one side of the coin.

As such, I strongly recommend reading the NIRS report, Pensionomics 2012: Measuring the Economic Impact of DB Pension Expenditures, which offers these findings for Texas:
  • In 2009, 478,767 residents of Texas received a total of $10.2 billion in pension benefits from state and local pension plans.
  • Their average pension benefit was $1,776 per month or a modest $21,318 per year. These benefits were for retired teachers, public safety personnel, and others who served the public during their working careers.
  • Between 1993 and 2009, 19.91% of Texas’ pension fund receipts came from employer contributions, 17.05% from employee contributions, and 63.04% from investment earnings. [emphasis added].
  • Retiree expenditures stemming from state and local pension plan benefits supported 128,204 jobs in the state. This represents 1.1 % of Texas’ labor force.
  • The total income to state residents supported by pension expenditures was $6.0 billion.
  • Retirees’ expenditures from these benefits supported a total of $20.2 billion in total economic output in and $11.2 billion in value added in the state.
  • Nationally, state and local pensions support 2.9 million jobs and $443 billion in economic activity.
We highlighted the 63.04% of pension benefits that come from investment earnings because that really speaks to the success of the hardworking pension board trustees, many of whom are TEXPERS members, who have played a part in growing those investment earnings over the years across our great state. Their contribution to that phenomenal statistic should not go unnoticed. Every dollar of investment return is a dollar that taxpayers or public employees need not provide.

It is our hope that TEXPERS played a part in that equation, having fulfilled our mission over 23 years to provide pension investment and benefits administration education to our members. – Max Patterson

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