Last week I presented our work on teacher pensions at the Education Writer’s Association (EWA) 67th national seminar. Education Week’s Stephen Sawchuk moderated the panel featuring Richard Ingersoll from the University of Pennsylvania, Susan Headden from the Carnegie Foundation for the Advancement of Teaching, and me.
Richard discussed his newly updated report on seven key trends affecting the teaching workforce, including the trends of teachers becoming more mobile and far less experienced than they were a generation ago. Susan discussed her recent report on what changing teacher demographics means for schools, students, and society. I focused on what this trend means for individual teachers and their retirement savings:
Why do pensions belong in this discussion? To begin with, pensions are an excellent source of local data. While Richard’s work presents a national picture of the teaching profession, the only place to find regular, high-quality data on state or local teacher retention data is the pension system. Pension plans keep detailed records of who stays and for how long, where they work, and how much money they earn. In order to estimate how much money it will need to pay in future benefits, pension plans also have to project future retention rates. Pensions publish those “withdrawal” estimates tailored to years of experience, age, and gender. Because these withdrawal assumptions are tied to large financial decisions, pension plans conduct regular “experience studies” to check their assumptions and compare their expectations with actual teacher turnover rates.
Every pension plan makes these calculations. They’re often buried in technical “comprehensive annual financial reports” under the terms “withdrawal” or “termination” assumptions. But they can tell us a lot about each state’s teacher workforce. For example, in Illinois we can see the state estimates that 10 percent of its “non-vested” 40-year-old female teachers (those with fewer than 10 years of experience) will terminate their employment in the next year. We can use the same table to create longer-term retention rates.
It's possible to use these retention rates to estimate what percentage of teachers in each state will reach various career milestones. In particular, as states have created longer "vesting periods," the time teachers must work before qualifying for a minimum pension, they're offering retirement benefits to a smaller and smaller share of today's teachers. Nationally, nearly half of all new teachers leave within 5 years. That's exactly where half the states have set their vesting requirements, although 17 states now require teachers to remain at least 10 years.
The result is that many teachers will fail to vest and will leave their years of service without a pension. In the median state, less than half of teachers will stay long enough to qualify for even a minimal pension.
Unfortunately, pension systems are designed for a much more stable workforce. Only a small fraction of teachers will remain a full career and earn a relatively comfortable pension. In the median state, less than one-in-five teachers will stay long enough to realize the benefits that begin accruing at the back-end of teacher careers. The majority of teachers will receive very little in the way of retirement savings.
States impose their own rules on teachers who leave before vesting and want to withdraw their contributions. In seven states teachers are eligible for only their own contributions. 41 states provide teachers with their own contributions plus some interest on those investments. But only 2 states provide the teacher their own contributions, some interest, and a share of the contribution employers made on their behalf. Nationally, the average employer contribution rate is 17 percent. That's technically part of teacher compensation, but a teacher who leaves before qualifying for a pension forfeits those contributions. The money stays with the pension plan and can be used to supplement the pensions of those who remain. Meanwhile, individual teachers forfeit thousands of dollars in retirement savings.
We'll continue to follow teacher retention and retirement trends here are TeacherPensions.org. Please check back for more information as we continue to write and blog about the issue.