Blog: Retirement Insecurity

When a teacher leaves the classroom, she may also leave the state or district retirement system. As a teacher leaves, what happens to her pension contributions?

With all the noise about teacher pensions it’s interesting that Social Security receives so little attention. About 40 percent of teachers are not covered. Why not?

States may be getting a deal for their teachers. Among other trends, the teaching force is simultaneously becoming younger and less experienced. This translates to cheaper costs for the state, but at the price of teacher retirement security.

To better understand the issues around California’s pension plans, I spoke with Dave Low, the Chairman of Californians for Retirement Security.

For the average full-career state worker, traditional defined benefit plans are working quite well. But these are the relative winners of the pension lottery, and all other participants are losing out.

Pensions provide us with more than just financial data. Pensions also provide us with key information about teacher retention, reaching back for decades. In New York City, teachers do not remain in the profession as long as they did in the past. Instead of responding to this trend, the New York City teacher pension plan has become less generous to mobile teachers.

Last week we presented our new paper, Friends without Benefits: How States Systematically Shortchange Teachers' Retirement and Threaten Their Retirement Security, at the 39th annual conference of the Association of Education Finance and Policy (AEFP).

To ensure the accuracy of pension plan assumptions, state retirement systems conduct regular “experience studies” to compare their assumptions with data about the actual numbers observed on the ground. Experience studies help ensure the accuracy of a plan by measuring any fluctuations in the field and proposing subsequent adjustments to plan assumptions. We unearthed over two decades worth of experience studies from North Dakota.

Two simple graphs show show that current teachers in Kansas City and St. Louis are poorly served by their defined benefit pension plans.

Do pensions affect teacher retention decisions? According to their own data, state pension plans say no, at least for the vast majority of teachers.