Annuity Options in Public Pension Plans

Robert L. Clark and Janet Raye Cowell

The paper will review available data on the annuity choices offered to retirees who participate in defined benefit (DB) plans. DB plans are most commonly offered by state and local governments to their employees, and information on annuity options is readily available. We will examine all state pension plans that cover general state employees and teachers, and we will develop a table showing the similarities and differences across these approximately 80 separate state retirement plans. We will contact the managers of a subset of these plans and request information on the proportion of retirees selecting each of the annuity options. Where possible, we will compare annuity options in the public sector to those offered by private sector employers. The paper will also include a review of the empirical literature on who chooses the various annuity options offered in DB plans. Finally, we will consider the policy implications of plan design and how this affects the types of annuities offered to retirees.

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