Teacher Pensions Blog

We've invited a range of panelists—from union leaders to economists to teacher voice organizations—to participate in an online forum on teacher pensions.  We’ve collected their responses and will be posting the authors’ contributions here, in their own words, on a rolling basis this week.

Today's guest post comes from Dennis Van Roekel, the president of the National Education Association, which represents more than 3 million public school employees. As NEA president, he leads the nation’s largest labor union and advocate for quality public schools.

1) Is there a teacher pension crisis? If so, what exactly is the problem?

There is no teacher pension crisis. Much of the media has bought into the distortions of anti-pension advocates who spread the belief that public education pension plans are bankrupting states and hurting middle-class taxpayers. The truth is that the vast majority of public education pension plans – which like all institutional investors, took a huge hit when the stock market plummeted in 2008-09 - have rebounded strongly and are more than adequately funded. Double-digit returns were the norm for public pension funds for the year ended June 30, 2013, with the median return of the funds analyzed by Pension & Investment magazine at 12.45%. The plans that are struggling are in states that chose not to make their required contributions during good economic times. Most states now face pension shortfalls that are manageable over the long term and do not require any significant increases in contributions or decreases in promised benefits. It’s also worth noting here that most public employee pension plans require employees to contribute a percentage of their salaries to the plan.

The real pension crisis facing this country is the number of workers who are not covered by any retirement plan. According to the Bureau of Labor Statistics, only 48% of all private sector workers participate in a retirement plan.

In terms of teachers and other public school employees, the real challenge is recruiting and retaining the most accomplished professionals to help ensure the success of all our students and ultimately our nation.

2) How do we ensure that teachers have secure, sustainable, and affordable retirements?

Maintaining the defined benefit (DB) plan as the vehicle for providing retirement benefits is the best way to ensure that education employees have a secure, sustainable, and affordable retirement. DB plans offer middle-class school employees benefits that will ensure that they remain in the middle-class into retirement. First and foremost, DB plans provide lifetime income. A defined annual benefit also means that retired public education employees will have an easier time budgeting for their regular expenses, because their pension check will not fluctuate with the ups and downs of interest rates or the stock market. Another reason DB plans benefit public education employees is that almost all of them provide disability and survivor benefits as well as retirement income.

There is no debating that with traditional DB plans, funding is an important concern that needs to be addressed. NEA believes that pension plans must be funded in a manner that assures the plans’ long-term stability so that promised benefits will be paid when due. Funding policy must address how the contributions will be made for ongoing benefits as well as how to finance gains or losses as experience occurs.

NEA also believes that pension funding should follow two key principles:

  • When actuarial liabilities exceed actuarial assets, the state and/or employer must make the necessary additional contributions to amortize the unfunded liability in no more than 30 years.
  • When actuarial assets exceed actuarial liabilities, the state and/or employer should not reduce the rate of contributions below the normal cost of the plan

In terms of taxpayer cost and affordability, because DB plans have higher returns, more balanced portfolios, and greater ability to pool risk, they cost about half as much as 401(k)-type plans to provide the same level of benefit according to the National Institute on Retirement Security. DB plans also benefit the taxpayer by discouraging costly employee turnover. In fact, DB plans encourage individuals to make teaching a long career, which helps to ensure a stable and productive workforce, and that’s a vital benefit for our nation’s schoolchildren and communities. Protecting the economic future of public school employees is not only the right thing to do, it is the smart thing to do—secure retirement helps ensure that all our students have highly accomplished professionals in their schools and classrooms, preparing them for college and careers.