All teachers deserve a secure retirement. But under today’s current teacher retirement savings plans, more than half of all new educators won’t qualify for even a minimal pension benefit. We took a state-by-state look at public teacher retirement plans, and the findings were dismal. Here’s what we saw:
Retirement plans for public-sector workers, including teachers, are, by and large, getting worse. The last recession came down hard on state governments; so much so that, in terms of retirement benefits, now is the worst time in at least three decades to become a teacher. Those cuts fall hardest on new and future teachers, particularly those who do not plan teach in the same state for their entire careers. Our rankings aimed to capture these discrepancies, highlight areas of progress, and provide recommendations for reform.
We didn’t pull any punches – the reality of the situation is bleak, and it is important to share the facts. The majority of states are enrolling their teachers in expensive, debt-ridden retirement systems that fail to provide most teachers with adequate savings. These plans are unfair and unsound. We also aren’t the first to champion for pension reform. The Urban Institute has an excellent resource on public pensions, and our report draws on data from the National Council on Teacher Quality, in partnership with EducationCouncil. Our rankings build on these efforts in an important way, by adding in details to reflect the key differences between states. Teachers in California may have different needs than those in Idaho; these states may need to implement different policies to meet these needs. We believe states should design retirement plans that support their particular teacher workforce.
To measure the extent to which states have created retirement systems that match and adequately support their existing teachers, we created a grading rubric focused on two questions: 1. Are all of the state’s teachers earning sufficient retirement benefits? And 2. Can teachers take their retirement benefits with them no matter where life takes them? Our rankings use an equally weighted grading system comprising six variables that help answer our two guiding questions. Those variables are:
- The percentage of teacher salaries going toward retirement
- The percentage of teacher contributions going toward pension debt
- The percentage of teachers who qualify for employer-provided retirement benefits.
- The percentage of teachers who earn retirement savings worth at least their own contributions plus interest
- The percentage of teachers covered by Social Security
- Whether or not a portable retirement savings option exists
Our rankings paint a sobering picture. No state scored higher than a C, and most came in at an F. Overall, while states tend to be contributing enough toward benefits, they haven’t managed debt well or ensured that all teachers have access to adequate retirement savings. Few states have adopted reforms that would give teachers portable retirement benefits with the freedom of mobility or other personal or career choices. Others do not offer Social Security coverage to their teachers, depriving them of a solid base of retirement savings. It’s also important to note that just because a state has managed its debt costs reasonably well does not necessarily mean its plan is working well for teachers.
New York is one such example. The state does okay overall in our rankings, coming in ninth. Debt costs are low, but the state requires new teachers to stay 10 years before qualifying for retirement benefits. This leaves 60 percent of the state’s teacher workforce without any pension benefit at all. Similarly, Wisconsin has debt costs of just 1 percent of teacher salaries, but teachers are left out of Social Security coverage and must stay in the classroom 21 years before they break even on their own contributions plus interest. Both states have managed their finances reasonably well, but neither one is truly meeting the retirement needs of their teacher workforces. In fact, they’re managing their pension finances on the backs of teachers, at least in part, by perpetuating heavily back-loaded systems that reward a few at the expense of most teachers.
Something needs to change. Our teachers deserve better, and while specific action steps will vary state-to-state, we believe all states should aim to provide all their teachers with a secure retirement. They can start by:
1. Getting their finances under control
2. Making portable teacher retirement plans the default, to provide all teachers with financially secure benefits
3. Expanding Social Security coverage to include teachers