TY - JOUR AU - Beshears, John AU - Choi, James J AU - Laibson, David AU - Madrian, Brigitte C TI - Behavioral Economics Perspectives on Public Sector Pension Plans JF - National Bureau of Economic Research Working Paper Series VL - No. 16728 PY - 2011 Y2 - January 2011 DO - 10.3386/w16728 UR - http://www.nber.org/papers/w16728 L1 - http://www.nber.org/papers/w16728.pdf N1 - Author contact info: John Beshears Harvard Business School Baker Library 439 Soldiers Field Boston, MA 02163 E-Mail: jbeshears@hbs.edu James J. Choi Yale School of Management 165 Whitney Avenue P.O. Box 208200 New Haven, CT 06520-8200 E-Mail: james.choi@yale.edu David Laibson Department of Economics Littauer M-12 Harvard University Cambridge, MA 02138 Tel: 617/496-3402 Fax: 617/495-8570 E-Mail: dlaibson@gmail.com Brigitte C. Madrian 730 B N. Eldon Tanner Building Brigham Young University Provo, UT 84602-3113 Tel: 801-422-4248 E-Mail: brigitte_madrian@byu.edu M1 - published as John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian. "Behavioral Economics Perspectives on Public Sector Pension Plans," in Jeffrey R. Brown and Robert L. Clark, organizers, "The Economics of State and Local Pensions" Journal of Pension Economics and Finance, volume 10, issue 2, (Cambridge University Press) (2011) AB - We describe the pension plan features of the states and the largest cities and counties in the U.S. Unlike in the private sector, defined benefit (DB) pensions are still the norm in the public sector. However, a few jurisdictions have shifted towards defined contribution (DC) plans as their primary savings plan, and fiscal pressures are likely to generate more movement in this direction. Holding fixed a public employee's work and salary history, we show that DB retirement income replacement ratios vary greatly across jurisdictions. This creates large variation in workers' need to save for retirement in other accounts. There is also substantial heterogeneity across jurisdictions in the savings generated in primary DC plans because of differences in the level of mandatory employer and employee contributions. One notable difference between public and private sector DC plans is that public sector primary DC plans are characterized by required employee or employer contributions (or both), whereas private sector plans largely feature voluntary employee contributions that are supplemented by an employer match. We conclude by applying lessons from savings behavior in private sector savings plans to the design of public sector plans. ER -