A newly released November 2025 issue brief from the National Association of State Retirement Administrators (NASRA), authored by Keith Brainard, NASRA Research Director, and Alex Brown, NASRA Research Manager, provides a detailed overview of employee contributions to public pension plans across the United States. The report, titled "Employee Contributions to Public Pension Plans," outlines national trends, recent reforms, and the increasing use of risk-sharing tools in public retirement systems. 

For trustees and administrators who oversee Texas public employee retirement funds, the findings offer valuable context for understanding contribution structures, long-term funding considerations, and national policy trends.

Key Takeaway: Nearly All Public Employees Must Contribute

According to the November 2025 NASRA report, nearly all state and local government employees in the United States are required to contribute toward the cost of their retirement benefits. This differs from the private sector, where most workers do not contribute directly to defined benefit plans. Required contributions create a stable source of revenue and help distribute funding responsibility between employees and employers.

Employee contributions accounted for 12 percent of all public pension revenue from 1995 to 2024. This totaled approximately 1.2 trillion dollars over the period.

States Increasing Contribution Rates Since the Great Recession

According to NASRA, 40 states increased employee contribution rates after 2009. Some increases apply only to new hires, while others apply to all active members. These changes reflect broader reforms enacted in response to the economic downturn of 2008 and 2009.

The current national median contribution rates are:

• 6.2 percent of pay for employees who participate in Social Security
• 9.0 percent of pay for employees who do not participate in Social Security, including many teachers and public safety personnel

Variable and Risk-Sharing Contribution Models Are Increasing

The NASRA brief notes a growing trend toward variable employee contribution structures. These designs tie contribution rates to a plan's funding status, investment returns, or normal cost changes. Colorado, Connecticut, Michigan, Utah, and Pennsylvania are among the states that use formulas to adjust employee contribution levels when specific thresholds are met.

Examples include:

• Colorado adjusts employee rates up or down based on whether employer contributions meet actuarial standards.
• Pennsylvania adjusts teacher and state employee rates every three years based on 10-year investment performance.
• Utah requires Tier 2 employees to contribute when plan costs exceed specific percentages. This is currently the case for both general employees and public safety workers.

New Contribution Requirements in Formerly Non-Contributory Plans

Several states that historically operated non-contributory plans have adopted employee contribution requirements. NASRA identifies Missouri and Florida as examples where new hires or all active workers must now contribute.

Hybrid Plan Participation Continues to Grow

The report highlights increased use of hybrid plans, which combine defined benefit and defined contribution elements. In most hybrid designs, employees contribute to the defined contribution portion and often share in the cost of the defined benefit component. These plans distribute investment and longevity risks between employers and employees.

Some States Grant Boards Limited Authority Over Rates

According to the NASRA issue brief, a small number of states grant retirement system boards the authority to adjust employer and employee contribution rates under specific conditions. Arkansas, Colorado, Montana, Ohio, Idaho, and Iowa fall into this category. This governance approach differs from Texas, where contribution rates are set by statute, employer election, or plan design.

Texas Contribution Snapshot

Appendix A of the NASRA report provides detailed contribution information for each state. Key details for Texas include:

• Employees Retirement System of Texas (ERS): 9.5 percent for employees hired before September 1, 2022, and 6 percent for those in the newer cash balance plan.
• Teacher Retirement System of Texas (TRS): 8.25 percent for active members. TRS members are not covered by Social Security.
• Texas Municipal Retirement System (TMRS) and Texas County and District Retirement System (TCDRS): Employee contribution rates range from 4 to 7 percent, depending on employer election.
• Law Enforcement and Custodial Officer Supplemental Retirement Fund (LECOS): Additional mandatory contributions apply for qualifying officers. 

These contribution structures generally align with national patterns, particularly for non-Social Security plans.

About the Author: Allen Jones is the director of communications and event marketing for TEXPERS. He joined the Association in 2017. Before TEXPERS, he worked in the news media industry, producing content for newspapers, magazines, and online publications and leading newsrooms as an editor and publications manager. [email protected]