Understanding and Defending the Current Defined Benefit Plan
January 11, 2021

NIRS Releases Pensionomics 2021

The National Institute on Retirement Security released a new report, Pensionomics 2021: Measuring the Economic Impact of DB Pension Expenditures. This report calculates the impacts U.S. pensions have on national, state and local economies. This study specifically evaluates data from 2018.

Pensionomics 2021 also evaluates the “multiplier” effect pensions have on the economy. Each dollar spent from a pension benefit has a direct, indirect and induced impact on the economy (or “ripple” effect). NIRS further explains this effect with the example of a retired firefighter who uses his pension benefit to purchase a new lawnmower (direct impact). This purchase supports the owner of the hardware store and other manufacturers involved in the sale and production of the lawnmower (indirect impact). The store owner and manufacturers can then expand their employment opportunities, hiring employees who will spend their paycheck in the economy (induced impact).

Some highlights from the report:

  • In 2018, each dollar paid out in pension benefits supported $2.19 in total economic output. This value increased $0.06 since Pensionomics 2018, which evaluated data from 2016.

  • Pensions supported $1.3 trillion in total national economic output.

  • In 2018, each dollar in taxpayer contributions to U.S. state and local pension plans supported $8.80 in total output in the country. Keep in mind, taxpayer contributions are a small source of financing for retirement benefits. The majority of money used to pay for benefits come from investment earnings and employee contributions.

  • For the state of Louisiana, each dollar paid in pension benefits supported $1.42 in state economic output. This value also increased since the last Pensionomics report by $0.09.

  • Pensions supported $6.6 billion in total economic output in Louisiana.

  • In 2018, each dollar in taxpayer contributions to Louisiana’s state and local pension plans supported $4.09 in total output in the country. Keep in mind, taxpayer contributions are a small source of financing for retirement benefits. The majority of money used to pay for benefits come from investment earnings and employee contributions.

The recent NIRS study reiterates the economic impact of pensions and echoes our support for our current Defined Benefit plan. Pensions provide a modest, reliable stream of income to retirees, which allows them to contribute to their local and state economies. This economic impact is vital as local communities and the state continue to face impacts from the COVID-19 pandemic.

Read the full report here.

Read the NIRS Fact Sheet for Louisiana here.

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