Blog: Teachers and Social Security

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

One of the big problems with teacher pension plans is that they’re not portable. A teacher who works 30 years in the same state can expect to earn retirement benefits that are 30-70 percent higher than a peer who divides that same career into two 15-year stints in different states. The teachers, the salaries, the job, everything can be the same, but the mere fact of moving, even one time, can significantly impact a teacher’s retirement wealth.

This problem is exacerbated in the 13 states where teachers and other government employees do not participate in Social Security. These states, representing about one-third of America’s teaching work force, have made the calculation that they will be able to provide better retirement benefits to workers by investing contributions in the stock market rather than paying taxes into Social Security. That calculation may be correct for the state itself over the long run (but it doesn’t look too smart right now…), and it may mean higher benefit payouts for workers who stay in the system, but it’s certainly a losing proposition for teachers who move across state lines.

The New York Times has an interesting story about Maine’s ongoing attempt to move teachers into Social Security. It reports that only about one in five teachers in Maine stick around long enough to earn maximum retirement benefits, and the rest leave, taking neither a full pension nor Social Security benefits with them. Mobility figures are similar in other states.

The proposed changes will not affect current workers, and thus will not improve the condition of the state’s pension fund. Still, it’s a sensible solution to both improve the state’s long-term fiscal outlook while simultaneously helping out mobile teachers. 

This blog entry first appeared on The Quick and the Ed.