By Fuiavailili Keniseli Lafaele, ASGERF Member
In recent years, pension reform has often been framed as a narrow question of cost control—reducing benefits, shifting risk to workers, and lowering long-term liabilities. But a growing body of research shows that these decisions carry broader consequences that extend far beyond pension balance sheets.
A national study titled “The Hidden Costs of Pension Reforms: Rising Income Inequality, Lagging Economic Growth” examined decades of data across states and at the national level.
Its conclusion is clear: pension reforms that weaken retirement security tend to increase income inequality and slow economic growth.
The study found that policies such as shifting from defined benefit pensions to defined contribution plans, increasing employee contributions, cutting benefits, or closing pension plans to new hires may reduce short-term costs. Over time, however, these changes reduce household stability, suppress consumer spending, and weaken local economies.
Public pensions are not simply retirement benefits. They are economic stabilizers.
Importantly, this does not mean that defined contribution plans have no role. On the contrary, voluntary defined contribution plans can serve as an excellent supplement to a strong defined benefit system. They provide additional retirement savings opportunities for employees who wish to save more, and they offer an important pathway for government workers who may not qualify for the defined benefit plan due to tenure, employment status, or career mobility. When designed as a complement—rather than a replacement—defined contribution plans can enhance overall retirement security without undermining the stability that defined benefit pensions provide.
When retirees have predictable income, they spend locally—supporting small businesses, service providers, and community institutions. Pension funds also invest long-term capital into financial markets and economic development. Together, these effects strengthen state and local economies and generate public revenues.
The research highlights a critical feedback loop: as pension reforms increase income inequality, economic growth slows.
When growth slows, investment returns decline and public revenues weaken—making pension systems themselves more vulnerable. In effect, policies intended to “save money” can end up costing governments more over time.
This national finding has important local relevance.
In American Samoa, the Retirement Fund also faces challenges unrelated to benefit design but equally important to its long-term health. Among them is the roughly $20 million in outstanding employer contributions owed to the Fund. Unpaid contributions weaken the Fund’s cash flow, reduce investable assets, and place additional pressure on long-term sustainability. Addressing funding discipline is therefore just as critical as debating benefit
structures.
The study also points to a better path forward.
States that maintained or strengthened pensions, invested in public education, and relied on more progressive revenue systems experienced broader and more durable economic growth. These policies produced what economists describe as a “trickle-up” effect—benefiting workers, retirees, businesses, and governments alike.
For American Samoa, this means that protecting retirement security, ensuring timely contributions, and strengthening governance are not competing goals—they are complementary ones.
The study concludes that trustees, policymakers, and pension stakeholders face a crossroads. One path leads toward greater inequality, slower growth, and long-term instability. The other leads toward stronger pensions, a healthier economy, and shared prosperity.
Choosing the better path requires informed and engaged members.
That is why the American Samoa Government Employees Retirement Fund Members Association (AMA) was formed, and why its first General Membership Meeting will be held on Saturday, January 10 (Nu’uli Voc Tech Gym @8:30 – 11 AM). The meeting is an opportunity for members to learn, ask questions, and participate constructively in discussions about the future of their retirement system.
Pension policy is economic policy. And its consequences—good or bad—belong to all of us.
ASGERF members are encouraged to attend, listen, and be part of the conversation.
