Blog: State Pension Plans

Guest blogger Chris Lozier proposes another way to put unfunded pension liabilities in perspective.
North Carolina recently passed legislation that will make it easier for teachers to receive retirement benefits.
Tennessee recently released a report that examines teacher retention in relation to effectiveness. Policymakers can use this data to rethink the state’s pension system.
A hundred years ago, Illinois teachers received a fixed, annual benefit that was determined independent of salary: a “flat pension.” However, there were severe issues with the original pension system.
Illinois experienced increased teacher retention over the past decade. Rising retention rates however translated to increasing costs, and in 2011, Illinois responded by making it more difficult for a teacher to receive a pension.
Pension analyses that ignore the effects on short- or medium-term workers are extremely incomplete.
We searched public pension plan documents to find what happens when teachers leave a pension plan. Although this this information is limited, some teachers prefer to cash out and take a lump-sum payment rather than waiting to draw a pension in retirement.
Michigan’s retention rates are actually higher than they used to be. Fifteen years ago, even fewer Michigan teachers stayed in the classroom than they do today.
A new paper looks at pension changes adopted by states during the recent recession and finds that new teachers face significant penalties based solely on the day they were hired.
Few states have adopted pure defined contribution plans, but there has been a recent increase in the number of non-traditional retirement plans, including hybrid plans that give employees more flexibility while reducing state financial burdens.