PAC Publications: State Workers Report

FINDINGS

The profile that emerged in the examination of Massachusetts statistics was of a state workforce which was slightly more female than male, was concentrated between the ages of 35 and 49, and in which individuals did not stay in the system for their full careers. As of December 31, 1995, there were 83,199 active employees under the state retirement system. (Teachers or employees of local government participating in other Massachusetts public systems were not included.) The following statistics were notable:

	•	53% of the state workforce was female as of December 31, 1995.

	•	Of workers employed as of December 31, 1995, only 44% of women were vested compared to 52% of men.

	•	Of workers (both terminated and retired) who left state employment between 1991 through 1995, 72% left prior to vesting.

	•	Only 11% of people retiring from 1991 through 1995 had 30 years or more of state service.

New Mexico, Rhode Island, and Tennessee were chosen for the comparative study because they provided a range of what was judged to be a high-benefit state (New Mexico), a medium-benefit state (Rhode Island), and a low-benefit state (Tennessee). All have public plans which supplement Social Security. Literature was obtained on the benefit formulas used by each state to be used for the calculations in this study.

Hypothetical state employees were developed who had work histories of 15, 30, and 40 years and salary levels of $20,000, $35,000, and $60,000. The purpose was to compare the actuarial value of the benefit they would have earned had they worked in Massachusetts with those of the comparison states. The analysis revealed the following:

	•	The Massachusetts state pension is worth more than Social Security at each of the salary levels studied. But since benefits in Social Security are weighted toward lower-income employees, the hypothetical higher-wage Massachusetts state workers did relatively better than the lower-wage workers when compared to a worker in the private sector with only Social Security.

	•	Individuals who have a split work history, between the private sector without a private pension and the Massachusetts public sector, have lower retirement benefits than individuals who work entirely in the Massachusetts system. The exception is those who worked for the state for less than 10 years.

	•	Individuals who work in the private sector without a pension for less than 10 years and for the Commonwealth for less than 10 years are left with neither Social Security in their own right nor a state pension.

	•	Each of the 24 hypothetical employees in Massachusetts had retiree benefits lower than their counterparts in each of the three states. The differential ranged from 101% to 239% of the Massachusetts benefit.

	•	Massachusetts has a lower contribution rate than each of the comparison states, ranging from 5% to over 10% depending on the date of hire. The combined state and Social Security contribution rate was 11.2% in Tennessee; 14.7% in Rhode Island; and 13.8% in New Mexico.