Reduced Work Hours Tied to Outsized Cuts in Retirement Benefits
Benefits for both defined contribution and defined benefit plans suffer when public sector employees switch to part-time hours, according to Pew.
Employees who enter part-time employment or temporarily leave the workforce could see a larger than expected impact on their retirement savings, according to recent analysis by Pew Charitable Trusts’ State Fiscal Policy project, in a study on public sector workers.
The report, “Public Workers With Nontraditional Career Paths May Face Insufficient Retirement Benefits,” quoted data from the U.S. Bureau of Labor Statistics stating that 11% of the employed population ages 25 through 54 worked part time in 2025 and many of those employees left the workforce due to caregiving and family obligations. To determine the impact of part-time work on retirement benefits, Pew looked at hypothetical outcomes for three sets of participants in public sector plans—a defined benefit plan, a defined contribution plan and a hybrid of the two.
In the DC plan example, an employee who spent an entire 35-year career working part-time would receive 50% less in annual retirement benefits from the plan than would a public sector colleague with a 35-year career working full-time—nearly $18,000 compared with nearly $36,000. That is proportional to a part-time employee working 20 hours a week, or half as much as a full-time employee.
The difference widened to 67% less with the hybrid plan and 75% less with the DB plan. The authors wrote that, because DB plan benefits are based on final average salary multiplied by years of service, part-time workers would be disadvantaged based on both factors.
In DC and hybrid plans, a full-time worker who switched to part-time for an extended period of time experienced bigger proportional losses in benefits, due to missed contributions and lost potential investment growth. Someone who spent five years of their career working part-time—i.e., 7% less time than in a 35-year career—would earn an estimated 9% less in benefits in a DC plan and 8% less in a hybrid plan. Likewise, someone who spent 10 years working part-time—14% less total time—would accrue 17% less in benefits in a DC plan and 15% less in a hybrid plan.
A part-timer who completely left the workforce for an extended period would find disadvantages in all plans—missed years of service in a DB plan and lost contributions and investment growth in a DC plan. Someone who spent five years out of the workforce—14% less time than a full-time 35-year career—would earn 18% less retirement benefits in a DB plan, 19% less in a hybrid plan and 21% less in a DC plan. Someone who spent 10 years out of the workforce—29% less time—would collect 34% less benefits in a DB plan, 36% less in a hybrid plan and 38% less in a DC plan.
The report’s authors reviewed several public sector retirement plans and found they did not clearly explain how switching to part-time work or temporarily leaving the workforce would limit retirement benefits. Their findings suggested such reductions due to career breaks would disproportionately affect women, who have reported lower confidence in retirement readiness and an increased likelihood to leave the workforce for extended periods due to caregiving or childcare obligations.
To support public sector workers with nonlinear career paths, the report’s authors recommended that retirement plans deliver adequate income replacement strategies and savings portability; include supplemental savings options; provide online tools to explain and calculate benefits; and offer personalized financial guidance.