Teacher Pensions Blog

Teacher pension plans are technocratic systems that award benefits through numeric formulas that apply equally to all members. Teacher pension plans are not a racist system; they do not treat people differently based on the color of their skin. 

But teacher pension plans are also not anti-racist systems. An anti-racist system would actively fight to push back against broader societal trends and seek to ameliorate racial wealth gaps. If there are any differences across racial lines among their members, teacher pension plan formulas will only amplify and extend those differences into retirement. 

Consider how the benefit formulas work. In a typical plan, members earn benefits through a simple formula based on their years of experience and final salary. In the example below, in a state with a 2 percent multiplier, a teacher with 25 years of experience and a final salary of $50,000 would earn an annual benefit of $25,000. Mathematically, it looks this:

On its face, formulas like this are entirely neutral; the formula itself is indifferent to anything else about the teacher. 

In the real world, however, teacher pension formulas literally multiply two variables--salary and experience--that are inequitably distributed across students and teachers. Research has found that low-income, Black, and Hispanic students are assigned to teachers with less experience and lower pay than the teachers working with white students. That is, the teachers of Black and Hispanic students receive lower pension benefits than the teachers of white students. The same trends appear among plan members: Black and Hispanic teachers have higher turnover rates and Black teachers at least receive lower pay than their white peers. 

Another way to understand how this works is simply to look at the biggest winners and losers under the current system. The biggest winners are long-serving, highly paid workers, especially superintendents and principals, positions that are disproportionately held by white men.

The biggest losers under the current systems are lower-paid workers who tend to change jobs more frequently, especially women, teachers of color, and other types of non-teaching staff who happen to be enrolled in so-called "teacher" pension plans.

(Lest anyone wonder if higher-paid workers pay for the more generous benefits they receive, the answer is no. While pension plan contribution rates are a function of salary, and thus higher-paid workers do contribute more while they work, they receive even larger benefits back in return.)

None of these factors make teacher pension plans a racist system per se. And it's fair to acknowledge that any type of retirement plan that delivers benefits as a function of worker salaries will only amplify existing inequities. But teacher pension plans are also not working to address longstanding wealth and income gaps across gender and racial lines that are prevalent in our society. 

These problems are not inevitable for retirement plans. Social Security, for example, is a type of defined benefit pension plan that provides proportionately larger benefits to lower-income workers, who are more likely to be Black and Hispanic. States could restructure their benefit formulas to offer better benefits to lower-paid workers. Or, alternatively, states could create retirement plans that award benefits to workers based entirely on their years of service rather than salary. I'm not aware of any teacher pension plan that include progressive features like these, but they could. Without taking such steps, teacher pension plans will continue to turn income gaps among their active members into lifetime wealth gaps for their retirees.