Employee Contributions to Public Pension Plans

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Unlike in the private sector, nearly all employees of state and local government are required to share in the cost of their retirement benefit. Employee contributions typically are a percentage of salary as specified in statute. Although investment earnings and employer contributions account for a larger portion of total public pension fund revenues, by providing a reliable and predictable stream of revenue to public pension funds, contributions from employees fill a vital role in financing pension benefits. In the wake of the 2008-09 market decline, employee contribution rates in many states have increased. This issue brief examines employee contribution plan designs, policies and recent trends.