How Will COVID-19 Affect State and Local Pensions for Non-Covered Workers?

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Jean-Pierre Aubry, Kevin Wandrei, and Laura D. Quinby, Boston College

Federal law allows certain state and local government employees to be excluded from Social Security if they are covered by an employer pension of sufficient generosity. As a result, approximately one-quarter of state and local workers are not covered by Social Security on their current job. Before COVID-19, these “FICA replacement plans” all satisfied the letter of the law in terms of providing benefits of sufficient generosity. This study has three aims. The first is to document the immediate impact of COVID-19 on the financial status of FICA replacement plans. The second is to investigate whether COVID-19 has led to cuts in benefit promises among plans, as well as the likelihood of future cuts. The third is to investigate the likelihood that FICA replacement plans will exhaust their trust fund assets and default on benefit promises.