Teacher Pensions Blog

South Carolina Governor Henry McMaster wants to shift all new teachers into district-run, portable, 401k-style retirement accounts. Although the details aren't fully available yet, the state already offers its teachers the choice to enroll in a well-structured defined contribution plan. That plan offers immediate vesting, a 5 percent employer match on contributions, and plenty of low-fee investment options. 

Compare that to how bad South Carolina’s standard defined benefit plan is for teachers and taxpayers. Here are the basic stats on South Carolina's current plan:

  • Less than 40 percent of South Carolina’s incoming teachers will stick around for 8 years, the minimum required to earn a pension; 
  • Less than one-in-four young teachers will teach in South Carolina for their full career and reap the large back-end benefits promised to them; 
  • Employee contribution rates have risen from 6.5 to 9 percent over the last ten years, meaning teachers are getting less in take-home pay for the same retirement benefit;
  • South Carolina districts are already contributing about 13.4 percent of each teacher's salary toward the pension plan. That's up from 8 percent ten years ago, and a bi-partisan law passed earlier this spring will increase it by another 1 percent a year through 2022; and 
  • Most of those contributions are being used to pay down past debts, not to pay for actual teacher benefits. In fact, South Carolina employers contribute less than 2 percent of teacher salaries toward actual retirement benefits, which is below the national average and could leave teachers vulnerable to insufficient retirement savings.

Combined, this leaves South Carolina teachers in an expensive, back-loaded system. The vast majority are losing out in terms of retirement benefits, and all of them are losing out because their employers have to keep paying down pension debts. While we don't know the full details of the new plan yet, pension reform would likely benefit South Carolina's teachers and students. 

To better understand the current situation in South Carolina, please watch and share the 3-minute video below: