While I was in Arkansas this week, I estimated that two-thirds of the state's teachers won't work long enough to qualify for adequate retirement benefits. Despite basing my estimates on the state pension plan's own actuarial assumptions, some legislators and audience members pushed back, arguing that the pension plan itself helps keep turnover down. As we've written before, the evidence does not support this argument, at least not for workers of all ages and experience levels. But the Arkansas data provide a few more reasons to doubt how much pension plans affect retention rates.
First, Arkansas teacher retention rates have fluctuated over time, even under the same pension plan. Using the state's own actuarial assumptions (drawn from actuarial reports here)*, I calculated five-year survival rates for teachers. The five-year survival rate is a nice round number, but it's also when teachers "vest" into the Arkansas Teacher Retirement System and first qualify for a retirement benefit. Here are the expected five-year survival rates for teachers at various points in time:
Five-year survival rate for Arkansas teachers, as of 2007: 51 percent
Five-year survival rate for Arkansas teachers, as of 2017: 60 percent
This may be contrary to public perception, but the Arkansas pension system at least is seeing lower rates of turnover than it did 10 years ago. These forecasts are based on historical data and are used in the state's official financial projections. The state's assumed teacher retention rates climbed 9 percentage points (about 17 percent) during the last decade, at a time when the pension plan benefits stayed more or less the same.
Second, as we've noted before, retention rates vary widely across districts, schools, and roles, and Arkansas is no exception. Arkansas doesn't release enough data to dig in too far, but its "teacher" pension plan also includes school support workers, and it disaggregates retention rates specifically for those workers. In contrast to teachers, school support workers in Arkansas have much higher turnover rates. Here are their five-year survival rates:
Five-year survival rate for Arkansas school support workers, as of 2007: 28 percent
Five-year survival rate for Arkansas school support workers, as of 2017: 23 percent
To put a finer point on it, just 23 percent of Arkansas school support workers stay long enough to qualify for any pension at all. They're paying into the pension system, and their employer is contributing on their behalf, but they'll never get anything out of it. Again, the pension plan stayed the exact same throughout this time period, and it was the same pension plan for school support employees as it was for teachers.
Third, I also looked at the assumed retention rates used by the Arkansas Public Employees Retirement System (APERS). In benefit terms, the ATRS and APERS plans are extremely similar, except that APERS covers state and local government employees. For those workers, APERS assumes a five-year survival rate of 27 percent, and it hasn't changed this assumption in the last 10 years.
Now, none of this proves pension plans do or do not have an effect on retention. That would require a much more rigorous study than the superficial look I've presented here. It's possible that pension plans do exert some retention effects on certain groups of teachers, but that those effects are being swamped by other factors like salary or working conditions. But neither of the Arkansas plans assume that workers change their behavior around the vesting period in order to qualify for a pension. And Arkansas' diverging trends do suggest that pension plans are not enough to protect against fluctuations in retention rates over time, or against some groups of workers having much higher or lower retention rates even in the same pension plan.
*Note: Throughout this post, I use the state's turnover estimates for females. The rates for men are even higher.