Recently Hillary Clinton, the presumptive Democratic presidential nominee, outlined her education platform to thousands of educators at the 158th annual National Education Association Representative Assembly in Washington, DC. Her broad priorities include: universal pre-K, elevating the teaching profession, and raising teacher salaries.
Music to teachers’ ears.
But there’s more! Buried in Clinton’s wonkier policy plans, there is another proposal that should also get teachers excited: improving employee benefits.
As a part of her Initiative on Technology & Innovation, Clinton proposes that the government ensure that employee benefits are “flexible, portable, and comprehensive.” She argues that strong benefits that workers can take with them whenever they move and that can be customized to meet their specific needs are essential to a 21st century workforce.
For teachers, improving their benefits – particularly retirement benefits – is long overdue. As has been the case for decades, almost every teacher is enrolled in a defined benefit (DB) pension plan. The idea was that teachers would accept lower salaries when working with the promise of a healthy pension when they retire. Although that model may have worked in an earlier era, today only half of teachers will actually leave the profession with a pension. Another large group of teachers will stay long to qualify for some pension, but it will be meager. In short, teacher pension plans are in desperate need of a redesign.
Clinton’s proposal rightly points out a few ways that teacher retirement benefits could be improved:
Teachers need more flexibility in their retirement plans. In half the states it would take a teacher at least 25 years for him or her to break even and have a pension with a value greater than the amount of money the teacher put into it. In some cases providing more retirement flexibility could mean allowing teachers to opt into a well-designed defined contribution (DC) 401(k) plan. In general these plans would provide greater retirement wealth for most teachers, except for those who teach from an early age and continuously in one state for perhaps 30 years. Alternatively, states could implement a hybrid program with both DB and DC components.
Teachers need portable retirement benefits. Most teacher pensions cannot be carried over state lines, meaning a teacher that moves to a new state will have to start fresh on a new plan. Maintaining multiple pensions can cost a teacher around half of her lifetime pension wealth. Without pension portability, teachers and families who move across the country can face a tremendous financial burden that compromises their retirement savings.
The teacher workforce – like nearly every labor force in America – has evolved considerably. No longer are teachers educators for life, nor do they live in a single state decade after decade. Teachers are mobile. They enter and exit the workforce at different points in their lives. Nevertheless, teacher pension systems have persisted for more than a century with more or less the same structure. By increasing flexibility and portability for teacher retirement benefits, we can ensure that teachers don’t have to choose between working with kids and earning a healthy start on retirement saving.