Teacher Pensions Blog

New Jersey teachers are furious. Last week, the state Supreme Court made a surprising decision, allowing Governor Chris Christie to skip payments that he promised just a few years ago. In one New Jersey county, public school teachers are protesting with a “black-out,” wearing signs showing the number of pension payments they have made over their teaching years. Teachers are wearing signs with varying numbers—20, 160, 260, 552, 780—representing their individual payments as well as their differing years of experience. 

New Jersey teachers have every right to be upset. After all, the Governor proclaimed in 2011 that his signature bipartisan pension reform would “bring an end [to] years of broken promises”—only to later break his own promise.

But these teachers could just as easily protest their shortchanged benefits. A teacher with 20 contribution payments, has about a year’s worth of teaching (assuming two monthly payments, or 24 per year) and isn’t going to qualify for a pension for another 216 payments or 9 years. Similarly, a teacher with 160 payments, or almost seven years of teaching, won’t qualify for a pension for another 96 payments. This is because the state requires a 10-year minimum vesting or service requirement (a practice that would be illegal in the private sector, where plans are federally regulated).

Neither of the above teachers actually have a pension yet, even though they’re contributing toward it, and close to half of the state’s new teachers won’t qualify for a minimum pension according to plan assumptions. But even teachers who have made over 260 payments, or who have about 11 years of teaching, are just about to accrue pension benefits and will most likely also leave shortchanged. In many cases, teachers will actually end up paying out more towards the system in contributions plus interest than what they will get back in benefits—basically losing money—according to research from the Urban Institute. Because pensions accrue wealth unevenly and primarily at the back end, teachers who stay less than a full career will accrue minimal benefits, often with a negative net return.

While Governor Christie has shortchanged the pension fund, the system itself is shortchanging the majority of New Jersey teachers. Unfortunately, because of the lack of transparency and byzantine nature of pension systems, many teachers may not realize this.