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City pension costs lower than expected

A new study finds that pension costs as a percentage of city revenue average 7.9 percent, much lower than originally thought.

By Paula Aven Gladych | Updated on November 05, 2013

The bankruptcy filings of cities like Detroit and Stockton, Calif., have shone a light on public pensions in the U.S. and how they impact government budgets, but a recent study by The Center for Retirement Research at Boston College found that overall pension costs borne by city residents amount to just 7.9 percent of revenue.

That figure is slightly more than the figure typically reported by the U.S. Census Bureau because the Center for Retirement Research used the full Annual Required Contribution or ARC to determine its percentage, while the census reported the amount that local governments actually paid, which was less than what they should have been contributing. That’s why many public-sector pension plans are underfunded.

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