Why Pensions are Bad for Cops (And What to Replace Them With)


Ask a police officer how long he or she plans to keep working in law enforcement and you’ll get a unique answer.

This answer won’t be the common private sector response, “oh, maybe when another career opportunity presents itself.” It won’t be when the officer’s financial planner says she has reached financial independence. It won’t be the date his last kid graduates college. It won’t even be the date the officer can afford to purchase a condo by Lake Mead, pay off his mortgage debt, and retire. And it will rarely be, “for as long as I still enjoy doing the work.”

In cop speak, it will be, “when my pension says I can retire.”

In plain speak, that translates to, “I’ve had enough, and I would quit and do something else if I wasn’t financially stuck here.

If you want to see improvements made in the law enforcement profession and its working conditions, don’t underestimate the impact of that statement. It answers why certain police processes never seem to change or improve. The prevalence of defined-benefit pensions in law enforcement significantly changes how officers go about their daily work, sometimes for the better and sometimes for the worse.

This won’t be a short article, but if you want to improve the working conditions for law enforcement officers, I believe that my recommendation of replacing defined-benefit pensions with the new model offered by the Jacksonville, Florida Sheriff’s Office is the right starting point.

What Are Defined-Benefit Pensions?

A defined-benefit pension is one where the employer promises to pay you a defined retirement benefit at a future date, usually based on your salary and length of service. Employer and employee contribution rates may fluctuate up and down in order to fulfill this defined benefit promised when you retire. Police departments in the United States commonly offer defined-benefit retirement plans.

Defined-benefit pension plans for police officers started in New York City in 1857 to compensate police officers who were injured in the line of duty. Police work is dangerous, but public safety is a necessity, and police work is a job that has to be done. The least a city can do for people who accept the challenge to become cops and are injured in the line of duty is to take care of them afterwards. That’s a fair arrangement.

Golden Handcuffs

The term “golden handcuffs” is a phrase that refers to financial incentives that encourage employees to remain with an organization for a stipulated period of time. Employers often backload  financial payments and benefits towards the end of the time period. This reduces employee turnover.

It costs a significant amount of time and money to train an officer, so it’s in cities’ and taxpayers’ interests to encourage them to remain in the job for as long as possible. Defined-benefit pensions work well for cities and taxpayers because if a hundred cops showed up for work yesterday, a hundred cops will show up for work tomorrow, next month, and next year regardless of difficulties thrown their way, until they reach pension eligibility.

Today, police pay and compensation packages often include golden handcuffs in the form of defined-benefit pensions. Officers give up some of their income into the pension system and accept a lower take-home salary. In return, and as long as they work for a few decades for the same employer, they can receive a pension for the rest of their life upon retirement.

So what does this mean for cops?

“Cheer up, gents. Just another twenty years to retirement.” (Photo by Norbu Gyachung)

Why Defined-Benefit Pensions Are a Problem for Cops

Full Retirement or Bust, Literally

To start with, you should understand just how financially tied many cops are to the job due to defined-benefit pensions. I’ll use an example from the Financial Samurai page. An officer that retires with an annual pension benefit of $60,000 would have a pension worth roughly $2,250,000. That’s about how much money you would need in a savings account to finance a nearly risk-free annual benefit like that for yourself.

Rewind the career timeline a bit, and that’s the same as a city putting about $400,000 into a day-1 rookie’s account and saying, “stick around for 25 years and the value it grows to will be yours, but leave one day early and you’ll get a small fraction of that.” The financial incentive to stay, despite whatever physical and mental challenges the job throws at cops, is overwhelming, especially as one nears retirement eligibility.

So what if an officer decides he or she doesn’t want to stay for 25 years? Many pension systems have long vesting periods, some as high as a decade. If an officer leaves before becoming vested, they just receive back their own paycheck contributions to the pension. The pension system keeps the city’s payroll contributions.

That’s a far cry in retirement readiness from the $2.25 million available had the officer stayed another decade or two to full retirement. Those officers will be taking a mulligan on their retirement preparation, dusting off their resumes, and starting from the bottom at another job.

If the officer stays long enough to become vested, but doesn’t stay for full retirement, he or she can often receive a smaller pension beginning in their 60’s. However, this future pension may not be adjusted for inflation and could be based on their old salary at the time they left. After two or three decades without an inflation adjustment, this future pension amount might cover a car payment, but not much else, and even less as inflation continues to erode it away.

Pension plans vary by city. Benefits may be higher or lower, vesting periods for partial pensions are different, and service time required for a full pension may be much longer. With a financial calculator and some Kentucky windage, you can calculate the value of most police pensions at the time of retirement. Generally they fall between $1 to $3 million in value, but whatever the number they are a strong incentive for cops to stay to full retirement.

Broken Promises

“This is a severely underfunded plan. The funded ratio is only 23.7%, and the unfunded liability is approximately $10 billion… The funded ratio is not projected to even reach 50% funded for another 26 years until 2043…  The amount of annual contributions defined under P.A. 99-0506 does not even cover normal cost plus interest on the unfunded liability for the next 14 years… This actuarial valuation assumes that the City will be able to make future contributions on a timely basis.  We did not perform an analysis of the ability of the City to make future contributions.”

Imagine your pension’s annual report opening with a statement like that. If you work for Chicago PD, that’s exactly what your 2017 annual pension report says. In other words, good luck getting the retirement benefit promised when you signed up. I noticed that a pension isn’t even mentioned as a benefit on their recruiting website. That’s a red flag.

But this shouldn’t be news to anyone. Chicago PD’s pension fund sounded the alarm about a $5 billion pension deficit in 2007 (the oldest actuarial report year available online), yet nothing seems to have been done to correct it. Today that deficit continues to grow past $10 billion.

Does someone think Trump and the Republicans are going to write a $10 billion check to bail them out? Republicans appreciate you and the service you do, but they don’t like your pension. Sorry.

What about the Democrats as a source of pension bailout funds? Presidential wannabes like Julian Castro are tripping over the fresh graves of fallen officers to denounce and insult them. I wouldn’t even put him down as a “maybe.”

But the problems with first responders’ pensions aren’t confined to Chicago. Underfunded public safety pensions are a nationwide problem. If you are a 30-year old cop and expect to live to 80, you’ve got to believe that not only will politicians fix your pension today, but future politicians won’t screw up your pension over the next half century. Don’t bet your livelihood on it.

Defined-benefit pension plans suffer from massive conflicts of interest when it comes to properly funding them. Basically no one wants to give the pension money. Voters want reduced property and sales taxes. Cities want to spend the money on infrastructure. The department wants the money spent on functioning patrol cars. Politicians want to spend money on pet projects. Officers themselves want higher take-home pay and a shorter vesting period.

So what happens? Pensions use lofty rate of return assumptions, artificially low life expectancies, and other squirrely numbers in order to reduce the money that is required to go into them.

This is why defined-benefit pension promises in countless pension systems around the country are being broken as we speak, and they will continue being broken in the future. Again, cops should be cautious about betting their retirement on them. Plenty of cops in broken pension systems right now are finding that out the hard way at a late stage in life.

Lack of Portability

Like many officers, I started working as a police officer in my late 20’s, and the earliest I can retire is just shy of 50. My pension is not portable to other agencies, which presents me with a series of dilemmas.

  • Single-employer career – Because the age cutoff age for new applicants at many law enforcement agencies is in the mid 40’s (the FBI age limit is only 37), and pensions require two to three decades of time at that same employer, cops essentially have one shot at picking a department to stick with in order to receive a pension.
  • Lack of career flexibility – After a decade of big-city policing (or small-town policing for that matter), many of us would like a change of pace in a different role in law enforcement. Maybe as an investigator at the attorney general’s office. Maybe in a coastal city working beach patrol for a few years. Maybe as a game warden. But if you would like to receive your defined-benefit pension in return for your lifetime of service and reduced paychecks, this will not be a choice for you.
  • Trouble dealing with life’s emergencies – Picture yourself as a 49 year old officer five years away from a pension. Your dad is 70, stricken with a debilitating illness, and needs help. He and his entire circle of friends lives in another state. You’re too old to apply work at the agencies near your dad. Do you quit and flush away the pension you were counting on for retirement to move closer to your dad to help him?

These are some of many hardships a defined-benefit pension system leaves officers with.

Suffering in Silence

Law enforcement takes a toll on its practitioners, and pensions encourage people to stick around long past when they otherwise would have left. Maybe there was a quieter time in law enforcement when being financially tied to the profession for a quarter of a century was a more palatable idea, but that day is not today.

This is a conversation I frequently have with my colleagues. One is interested in leaving to go to law school. The problem is that, financially, he knows he is far better off sticking it out to retirement than starting over and taking a gamble on a new career.

The problem is further compounded with age and increased financial obligations. Imagine you left the private sector at age thirty, are now forty-six years old, you’ve been a cop for sixteen years, have a few kids in college, a mortgage, and two aging parents to take care of. You have a great salary and your pension is only a decade away.

But sixteen years of wading through human misery has taken a toll. You’ve seen one too many easily-avoided traffic fatalities. You dread coming to work. Your spouse is tired of seeing your suffering and the black cloud it brings over the family and is threatening divorce.

You think of quitting, but your retirement plans are wrapped up in the pension. If you leave before reaching your full pension, not only will you walk away with little money for retirement, but you’ll likely end up finding a lesser-paying job that won’t cover college bills and the cost of adequate care of your aging parents.

For many years, more officers have died by suicide than were killed on the job. A 2012 study showed that the average age of an officer who died by suicide was 42 and had an average career length of 16 years.

Why Pensions Are a Problem for Reformers

It’s often said that there are two things cops hate: the status quo and change. Pensions are a big root cause of resistance by officers to change. Why? Every bit of improvement in oversight and accountability of officers brings an increased risk of some of those officers being fired.

In the private sector, being fired from a job often carries little long-term consequence. You find the same job of similar pay at a different employer, take your 401k balance with you, and continue chugging along.

But if an officer is fired, the monetary penalty is enormous. His or her years and years of working towards a pension instantly vaporize. At a later stage in a career and closer to retirement age, that’s a financial penalty that can run into the millions of dollars.

Not only that, but it can be impossible to then find a new job at a different department, regardless of the reasons for the firing. Like with many jobs in the military, there are few private sector jobs where policing skills carry over. Even if the officer has a technical college education, those skills are likely too out of date to be appreciated in the private sector.

Starting over from the bottom in a low-paying job is the common outcome of being fired as a law enforcement officer.

This creates a strong financial incentive for officers and their unions to fight tooth and nail against any new policy or law that increases the risk to their employment and pension.

Why Pensions Are a Problem for the Public

Conflicts of Interest

From a taxpayer perspective, cops should be out in the streets solving crimes and catching criminals. That makes sense. It’s their job, after all, and the more experienced and efficient the cops on the streets are, the better.

From a police officer’s perspective, doing their job catching criminals increases the risk of being arbitrarily fired, ending up the target of a political prosecution, or worse. Once an officer has a mortgage, kids, aging parents, and other obligations, the desire to leave the streets, quit doing police work, and find a less-risky administrative job increases.

The de-policing trend is no fluke or accident. Cops constantly perform risk-reward analyses, and many determined that the career risks (and legal risks) of doing the job as effectively as possible outweighed the rewards. This is why proactive police work in recent years diminished.

This is also why every support and administrative job at any given police department is fully staffed  and every patrol shift has vacancies that never get filled. As soon as cops have enough seniority to apply for other jobs, they leave patrol and take their hard-earned skills with them.

They leave behind brand-new rookies that are being trained by minimally-experienced field training officers. It is not uncommon for a twenty-four year old with two years of police experience to be the senior officer on a patrol shift.

Discourages Supervisor Involvement

“No good decision was ever made in a swivel chair.” – General George Patton

Ideally, you would want people with decades of experience out patrolling the streets with rookie officers, guiding and mentoring them, and keeping them from making mistakes. You would want experienced officers helping rookies understand not only when to arrest someone, but when not to arrest. Experienced officers can help rookies navigate the dense policy manual forests that stipulate every action, helping rookies make decisions that are not merely approved by policy and state law, but also ethically superior decisions that live up to the spirit of policy and law.

But as I pointed out, experienced officers routinely disappear into support units. So what happens when they promote and become supervisors?

Look around nowadays and see how often you spot officers with stripes on their sleeves or shiny things on their collars out in the field. I don’t mean at community events and press conferences.

I mean out helping newer officers work the scenes of aggravated assaults and serious crimes, taking point when searching wooded areas for armed suspects, and putting handcuffs on wanted offenders who don’t want to be handcuffed. Likely, you’ll rarely see supervisors leading at scenes like these which are frequently the ones that devolve into headline-news stories.

Instead, you’ll find them in an office busying themselves with paperwork. In reality, paperwork amounts to only a few hours per day, leaving plenty of time to go out in the field. Most of it, especially emails, can be reviewed in the field on a patrol car’s laptop.

But if your pension is only a few years away, why risk your retirement by going out and supervising officers in the field?

Pensions pit experienced supervisors’ desire to hit the streets and mentor officers against the steep financial risk of getting caught up in a YouTube video, fired, and losing their pension. So what should replace defined-benefit pensions?

Jacksonville, Florida as the Future of Police Retirement

The Model: 401(a) Defined Contribution Plan plus a 457(b) Deferred Compensation Plan

The new retirement model of the Jacksonville, Florida Sheriff’s Office (JSO) is the best replacement for defined-benefit pension plans. It’s a 401(a) defined-contribution pension plan plus a 457(b) deferred compensation plan (the government employee version of a 401(k).

Like in many cities, Jacksonville, Florida faced a growing problem with its Police and Fire Pension Fund’s unfunded liabilities. Between 2008 and 2015, the unfunded debt tripled from half a billion dollars to $1.6 billion. Simply put, the fund was headed for insolvency.

In 2017, the City of Jacksonville reached a pension agreement with the police and firefighter unions. The deal closed the traditional defined-benefit pension plan to future employees. After the deal, current employees remained in the existing pension, and the city contributes extra money to keep it solvent. That’s fair. As Fort Worth officers recently argued, “a promise made should be a promise kept.”

The big change is that new JSO officers are now enrolled in a 401(a) defined-contribution plan and also have the option of participating in a 457(b) deferred compensation plan. For the defined-contribution plan, the city contributes 25% of payroll into the 401(a), the employee contributes 10%, and the officer is vested after three years of service.

What is a 401(a) defined-contribution plan

The 401(a) defined-contribution plan, sometimes called a “money purchase pension plan,”  is a type of qualified retirement plan. It is often confused with a 401(k), but it is not the same as a 401(k). For 2019, the 401(a) contribution limit is $56,000 per year (as opposed to the 401(k)’s $19,000 limit).

Like with traditional police defined-benefit plans, under a 401(a) plan, both the employer and the employee make contributions to the plan. These contributions can be the exact same amount as the contributions currently going into existing defined-benefit plans.

This means that if your city contributes 15% of payroll and you contribute 8% to your current defined-benefit pension plan, this exact same contribution amount can be continued under a 401(a) plan to a 2019 limit of $56,000 per year.

Unlike a traditional defined-benefit pension, your 401(a) account is yours individually. You are not pooled in with thousands of other active, retired, and future employees. Your funds cannot be tampered with by politicians. Whatever the balance of your account grows to is yours to keep and choose what to do with.

What is a 457(b)?

A 457(b) is the government employee equivalent of the private sector’s 401(k). The 457(b) plan, sometimes called a “deferred compensation plan,” is a voluntary plan where an employee can choose to defer money into his or her individual account. It functions exactly the same as a 401(k) and has the same $19,000 contribution limit for 2019.

If you are a police officer, you should absolutely contribute to your 457 plan. They help reduce your total portfolio risk, act as an inflation hedge, and give you liquidity when you need it.

Why a 401(a) Defined-Contribution Plan and 457(b) is the Best Option

The 401(a) defined-contribution pension model is the best fit for modern police officers given today’s challenges. I’ll compare you and your defined-benefit pension with a hypothetical new Jacksonville officer to illustrate the differences. We’ll assume you are both paid the same.

Same benefit as a traditional pension: Traditional pensions are not magic money boxes. Defined-benefit pensions do not grant you more retirement money for a given contribution amount and rate of return than a defined-contribution plan with the same contribution amount and rate of return.

If you and your employer contribute $20,000 per year to your traditional defined-benefit plan and your Jacksonville buddy contributes $20,000 to his defined-contribution plan, and the funds are invested the same way, you will both have the same-sized pool of money to draw a benefit from at retirement.

If your Jacksonville buddy wants to use some or all of his 401(a) balance to buy an annuity, he can have receive the same monthly annuity payment in retirement as the payment you receive from your defined-benefit pension. You don’t need a defined-benefit pension to receive a set monthly benefit.

Same risk as a defined-benefit pension: I’ve heard countless people say that a traditional defined-benefit pension is guaranteed money so it less risky than a defined-contribution plan.


You only think the money is guaranteed. Defined-benefit plans have plenty of risks that defined-contribution plans don’t have, such as hidden mismanagement practices, political interference, underfunding, excessive assumed rates of return that fail to be achieved, and the risk that future generations of managers will cut your pension benefit to solve their underfunding problems.

Look at Chicago police retirees. With a pension funding ratio of 23.7% and falling, do you really think the continuance of their monthly pension checks is guaranteed?

Choose how long you want to work: Police work is not for everyone, and that’s fine. No one should be financially strong-armed into staying in law enforcement. Your Jacksonville buddy who decides that nine years is enough can leave and take his entire 401(a) defined-contribution balance with him.

What does that look like?

Let’s say the hypothetical nine-year average earnings for a JSO officer are $55,000 per year. The city’s 25% payroll contribution would be $13,750 per year and the officer’s 10% contribution would be $5,500 for a total of $19,250 per year.

Compounded at a reasonable 6% for eight years, that would grow to a nine-year total of $228,954. Not bad. Jacksonville appreciates you buddy’s service and wishes him luck in his new career. Hope the quarter of a million dollars helps. He can roll those proceeds into an individual retirement account (IRA) or a 401(k) at his next employer and not miss a beat on the way to retirement.

But you? Let’s say that you consider leaving at nine years and are not yet vested in your defined-benefit pension. If your contributions grew at the same 6% rate, you would leave with a total of $65,374. You’ll probably decide that’s not a good financial idea, find an office job, and busy yourself checking emails for another decade or two until you are eligible for your pension.

You can vote with your feet: It seems like not a day goes by without some city or state finding new ways to make life as a police officer more intolerable. As I pointed out above, cops either don’t leave or can’t leave because they are financially trapped in a pension system. There is no real mechanism for cops to hold cities responsible for bad behavior.

But imagine what policing would look like if every cop was under a 401(a) defined-contribution plan, could pick up their accrued balance, and walk to a new department at any time.

Employers would have to treat you better. Workplace conditions would improve and wages would rise to attract new applicants and keep existing ones. Seattle isn’t discussing plans to offer $15,000 signing bonuses to new officers out of the goodness of their hearts. Cities that don’t support their officers will see them vote with their feet and go to cities that do.

And that’s a good thing.

I’ll bet that the Jacksonville Sheriff’s Office, once a good number of their officers are vested under the new 401(a) system, becomes consistently rated as one of the best law enforcement agencies to work for.

No moral hazard: Altruism isn’t a requirement to serve on a pension board. Plenty of generations of people who managed failing pensions knew that their pensions were underfunded and unsustainable. But they chose to keep quiet and get themselves to retirement.

They chose to benefit themselves and pass on the cost to future officers.

Your underfunded pension may have “fixed itself” by requiring new officers to work more years than you had to work and give more of their paychecks than you gave to foot the bill of your benefits that you didn’t pay for. But at some point, these officers will run the pension. Don’t expect mercy from them.

Intergenerational theft won’t be looked kindly upon. Your cost-of-living-adjustment (COLA), if not your benefit outright, will be the first thing slashed.

401(a) defined-contribution plans don’t have this problem. Just like with your deferred compensation account, you own the account and are not reliant on the altruism of future generations of politicians and pension managers to maintain your balance.


It’s time for police officers to re-examine how we prepare for retirement. If you were able to design your own police retirement system, the last recommendation you would make would be to financially leash yourself to the same department for a quarter of a century or else lose a ton of money and retirement readiness.

But that’s exactly where defined-benefit pensions have left us, and we are worse off for it.

The Jacksonville Sheriff’s Office 401(a) defined-contribution plan paired with a 457(b) deferred compensation plan is the right model for modern times to replace defined-benefit pensions.


Mike Endres graduated from the University of Texas, served in the Marine Corps, and went to work in finance. Tired of cubicle life and missing the camaraderie of the military, he followed a friend into law enforcement and currently works on patrol. He enjoys writing for his personal blog, Power and Purpose.

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