Path Dependence in Pension Policy: The Case of Florida Local Governments

摘要

Policymakers face significant liabilities with traditional defined benefit (DB) plans in the government. Unlike defined contribution (DC) plans, the fiscal risks under DB plans are borne by the plan sponsors, that is, state and local governments, and ultimately taxpayers. The Great Recession heightened pension solvency concerns in many jurisdictions, necessitating a reconsideration of their retirement systems. Drawing on Florida municipalities' plans from 2006 to 2012, we develop an index of pension change and track its evolution. Findings reveal a preponderance of incremental change and suggest the lack of significant change may be a function of high financial costs and status quo bias.