Pension Expenditures’ Effects Are More Than What Meets the Eye

By ASPPA Net Staff • September 15, 2016 • 0 Comments
Providing pension benefits obviously means spending money — to build the plans and accounts and to administer them. It’s money well spent to beneficiaries and to employers, particularly if the plan enhances the latter’s ability to attract and retain qualified employees. But a recent paper argues that funds spent on pension plans have additional effects beyond the obvious.

“DB pension plans provide a critical source of reliable income for 24.3 million Americans. These plans are a cost-effective way to provide secure lifetime income for retired Americans and their beneficiaries after a lifetime of work. Moreover, DB pension plans generate economic benefits that reach well beyond those who earned benefits during their working years,” argues the National Institute on Retirement Security (NIRS) in “Pensionomics 2016: Measuring the Economic Impact of DB Pension Expenditures.”

The pensions that provide retirees with secure income in turn benefit the local economies as those retirees provide them with stable income through their personal expenditures, says the NIRS. “Retirees who spend their paychecks regularly in their local economies — especially during tough economic times — provide vital revenues to local businesses and income to local workers,” says the paper.

And this effect, while local, is also broad in an economy and nation our size. “Virtually every state and local economy across the country benefits from the spending of pension checks,” the NIRS says. It notes that in 2014, across the United States more than $1.2 trillion in economic output resulted from pension expenditures. In that year, says the paper, pension expenditures supported more than seven million jobs that paid more than $350 billion to those employees. In addition, benefits paid by pension plans yielded almost $190 billion in tax revenue for governments at all levels in 2014.

The bottom line, argues the NIRS, is that pension plans support more than just retirees and beneficiaries. “Pension benefits play an important role in providing a stable, reliable source of income regardless of economic climate — not just for retired Americans, but also for the local economies in which their retirement checks are spent,” it says.