Teacher Pensions Blog

  • Here in the United States, the vast majority of public school teachers are enrolled in traditional defined benefit pension systems. But that fact hides several points of nuance. Here are five key points to remember about teacher pensions: 

    1. Most public school teachers are enrolled in a traditional defined benefit (DB) pension plan 

    Unlike teachers in private schools, the Bureau of Labor Statistics reports that 89 percent of “primary, secondary, and special education school teachers” employed by state or local governments participate in a defined benefit (DB) pension plan. That figure is down slightly from 2009, when 94 percent of public school teachers participated in DB plans.

    Those numbers are changing over time as more states transition to alternative retirement plans such as defined contribution or cash balance plans. Some states give new teachers a choice over which type of retirement plan they prefer, but the new plans usually only apply to new workers, so participation rates will fall slowly as more states transition away from the old DB pension model. 

    2. Enrollment in a pension plan does not necessarily guarantee teachers receive a pension

    States impose rules called vesting requirements that determine how long a teacher must stay before she qualifies for a pension. The majority of states require teachers to serve for five years before qualyfing for a pension, and 16 states require teachers to serve for 10 years. Due to relatively high early-career turnover, large numbers of teachers won't reach these vesting requirements. In the median state, about half of all new teachers won't stay long enough to qualify for any pension at all. (See the numbers for your state here.) Whether they decide to switch jobs, move to another state, or leave the workforce entirely, many teachers are technically enrolled in a pension plan, but they may never actually receive a pension. 

    3. Even after qualifying for a pension, some teachers will cash out 

    Merely qualifying for a pension does not say much about how large that pension will be, and many teachers decide they'd rather withdraw their contributions than wait to draw a pension when they reach retirement age. For example, a 40-year-old teacher with 10 years of experience would likely qualify for a pension, but she may not be able to collect those payments until she turns 60 or 65. Her pension at that point will be based on the salary she earned while she was 40, and inflation will have worn away its value significantly. (For a longer explanation of how this works, see here.) This issue isn't as true for older teachers who are closer to retirement, but they may still decide they'd prefer a lump-sum withdrawal payment over monthly pension checks in retirement. 

    These are complicated decisions, and teachers should consult a financial professional to help determine what's best in their unique circumstances. 

    4. Unlike private-sector workers, not all teachers are covered by Social Security 

    About 40 percent of public school teachers, or about 1.2 million teachers nationwide, are not covered by Social Security. Those teachers are concentrated in 15 states— Alaska, California, Colorado, Connecticut, Georgia, Illinois, Kentucky, Louisiana, Maine, Massachusetts, Missouri, Nevada, Ohio, Rhode Island, and Texas—and the District of Columbia, where many or all public school teachers neither pay into nor receive benefits from Social Security. Teachers in those states face substantial uncertainty and must rely more heavily on their employer retirement plans (state pensions) and personal savings. 

    5. The "average" teacher pension can be quite modest, but that can be a misleading statistic

    While there's a debate about whether teacher pension plans are too generous, that debate is skewed by who ends up receiving benefits. For example, going back to our earlier example, for a teacher who quits working at age 40 with 10 years of service, her pension is likely to be quite modest by the time she's eligible to collect her benefit. In contrast, some long-serving, highly-paid employees wind up with pensions that surpass $100,000 a year or more. There are many more people like the former than the latter, but calculating the statistical average combines them all into one number. 

    Teacher pension plans today are very expensive, but the bulk of those costs are going to pay down unfunded liabilities, not for actual benefits for teachers. Once we take out the debt costs that states and districts are paying, the total retirement savings provided to teachers start to look worse. Moreover, pension plans distribute benefits in an uneven fashion. Some lifelong veteran teachers and school district administrators qualify for pensions that are quite generous, while the bulk of teachers will receive far less.

    Teachers may take comfort with the fact they're enrolled in a pension plan, but they should check the fine print and consult a financial advisor to determine how long they need to stay in their respective pension plan in order to secure a solid foundation of retirement benefits. 

  • There’s a common misconception that teachers’ retirement plans are gold-plated, extremely generous options. And for a very small pool, they do provide a secure retirement. But that’s not the case for the majority of teachers. To illustrate this, we dug into a sampling of states to see how they measure up, and ran the numbers to see if an alternative plan design might serve more of their workforce. Here’s what we found for Georgia.

    1. Georgia’s current defined benefit plan is more extreme than most. The formula used by the Teachers Retirement System of Georgia (TRSGA) offers minimal benefits to short- and medium-term workers and requires an especially lengthy vesting period – ten years. If Georgia teachers stay nine years or less, they do not qualify for any pension or employer-provided retirement benefit at all.

      In addition, not all Georgia teachers are covered by Social Security. It’s up to each district to decide whether to extend coverage to educators, and teachers in metro Atlanta, DeKalb, Fulton, and Clayton counties, who do not have Social Security coverage, are particularly vulnerable to a poorly designed state retirement system.
    2. Most Georgia teachers won’t actually benefit from their retirement benefits. In Georgia, 83 percent of teachers who begin their careers at age 25 will leave before reaching 30 years of service, which is the point when they’ll finally qualify for a benefit that’s more than their own contributions plus interest. The graph below compares pension wealth accrual to Georgia teacher retention rates, and captures this discrepancy.


    1. Given its current workforce demographics, most Georgia teachers would do better under a more portable retirement plan. A portable plan would better support Georgia’s mobile teacher workforce and allow educators to take their savings with them across state lines or out of the classroom. In addition, nearly all portable plan options would accrue benefits in a smoother fashion, rather than the state’s current back-loaded model. We know most Georgia teachers will leave before they reach peak pension wealth – they shouldn’t suffer from inadequate retirement savings because of it.

    All Georgia teachers should have access to a portable, fair retirement plan, as well as Social Security coverage. The current system works for some, but not most of Georgia’s educators. A portable solution could better serve the state’s existing workforce.

  • Teacher pension funds are complicated and can be difficult to understand. They’re not as straightforward as other retirement savings accounts, such as 401ks, nor are they like traditional investments in stocks. In a 401k, for example, the value of the retirement fund is determined by employer and employee contributions, plus the growth of those investments over time. 

    Defined benefit pension plans, like the ones serving 90 percent of public school teachers, don't work that way.

    To be sure, teacher pension plans are invested in the market. However, individual teacher contributions and those made on their behalf by the state or school district do not determine the value of the pension. Instead, a teacher's pension wealth is determined by a formula based on her years of experience and final salary.

    To further complicate matters, there often are several tiers within a state’s pension fund that provide different levels of benefits based on when a teacher was first hired. And of course, teacher pension funds can vary significantly from state to state.

    How Teacher Pensions Work in Arizona

    In Arizona, teachers are a part of the Arizona State Retirement System, which includes not only teachers but all state employees. Indeed, the system was established in 1953 and teachers voted to join two years later.

    The basic structure of Arizona’s teacher pension is similar to that of other states. The figure below illustrates how a teacher pension is calculated in Arizona. It is important to note, however, that the state assesses an educator’s final salary based on their average salary from the past 5 consecutive years.

    Generally, states use a consistent multiplier, for example 2 percent, for all teachers. However, Arizona is unique and applies four different multipliers depending on the teacher's years of service. This approach provides slightly more generous benefits to those teachers who serve the longest. As shown in the table below, for the first 19 years a teacher’s pension benefit will be calculated with a multiplier of 2.1 percent. Once they begin their 20th year teaching, however, the multiplier increases to 2.15 percent.

    Table 1: Arizona’s Pension Multiplier

    Years of Service


    Less than 20


    20 to 24.99


    25 to 29.99


    More than 30



    There are a few other features of Arizona’s teacher pension plan that make it unique. First, unlike most states, Arizona does not have a vesting period. This means that educators qualify for a pension regardless of how long they serve. That pension may not be worth all that much, and educators can’t begin to collect it until they hit the state’s retirement ages, but immediate vesting does at least ensure all educators begin to accrue pension benefits immediately.  

    The state sets specific windows when teachers can retire with full benefits based on age and years of experience. For new teachers just startting out in Arizona, they can retire with their full benefits when they meet the following conditions:

    • Age 65;
    • Age 62 with at least 10 years of experience
    • Age 60 with at least 25 years of experience; and,
    • Age 55 with at least 30 years of experience.

    Additionally, Arizona allows early retirement at age 50 with at least 5 years of experience, but teachers taking that option have their benefits reduced based on their years of experience and how early they are retiring.  

    As they work, teachers and their employers must contribute into the plan. Those contribution rates are set by the state legislature and can change year-to-year. In 2017, both the state and the employee contributed 11.34 percent of their salary to the pension fund. This year the rates are the same, but that may not always be the case.

    Finally, in Arizona, as with most states, teacher pensions are not portable. This means that if a teacher leaves the state she can’t take her benefits with her, even if she continues working in the teaching profession. As a result, a teacher who moves states might have two pensions, but the sum of those two pensions is likely to be worth less than if she remained in one system for her entire career. In other words, the lack of benefit portability will hurt the long-term retirement savings of any educator who leaves teaching altogether or who crosses state lines to work in another state.

    Arizona’s Teacher Pension System Heavily Favors Teachers with More Than 25 Years of Experience

    An unfortunate feature of teacher pension systems is that they are severely back-loaded. In other words, benefits accrue extremely slowly and thus educators only earn valuable pensions after decades of service. This structure may work well for teachers who spend their entire career in classrooms in a single state, but it does not work as well for those educators who change jobs or are more mobile.

    The graph below illustrates the benefit accrual rate for a typical Arizona teacher who begins teaching at age 25. The first thing to notice is that benefits accrue very slowly until they teach for about 25 years. However, According to the state’s own projections, only about 19 percent of teachers will remain in the profession long enough to reach their 25th year of service. In other words, for most teachers Arizona’s immediate vesting does not translate into a valuable pension benefit. 

    Figure 2: How Retirement Assets Accumulate in the Arizona State Retirement System 

    There is a severe mismatch between Arizona’s teacher pension system and the educator workforce in the state. Pensions are great at providing valuable retirement benefits to those who spend their entire career in schools in one state. But the Arizona teacher workforce doesn’t fit that model. As a result, the vast majority of teachers in Arizona will leave their years of service with only meager retirement benefits. 

    Overall, Arizona’s teacher pension system is a bit more complicated than the typical state plan. But as with most state pension funds, Arizona’s teachers must remain in the profession for nearly three decades to earn a quality retirement benefit. With that in mind, new and current teachers in Arizona should think carefully about their career plans and how they interact with the state's retirement plan. Educators who leave the profession early, even if they qualify for a small pension, will unintentionally do damage do their long-term retirement savings.


  • Based on media reports, you might think that all public school teachers receive gold-plated health care benefits. While there are some outliers, on average teachers receive benefits that are slgihtly beyond average but not extravagant. Here are three key facts* that shape public perception around teacher health care benefits: 

    Fact #1: Teachers are much more likely to receive health care benefits than employees in other fields. This is a big discrepancy. Two-thirds of all employees in the private sector have access to medical care benefits through their employer, whereas 99 percent of public school teachers do. Teachers are also far more likely to receive retiree health benefits than their peers in the private sector. 

    Teachers are also more likely to have access to other health care benefits. Compared to their private-sector peers, teachers are more likely to have access to dental care (58 versus 42 percent), vision care (36 versus 23 percent), and prescription drug coverage (97 versus 66 percent).

    Fact #2: Among those receiving benefits, teacher health care costs are slightly higher. In terms of medical care premiums, teacher plans are slightly more expensive, and teachers bear a slightly lower share of their costs than private-sector workers do, but the gaps are not as large as you might expect. Compared to private-sector workers, a higher share of teachers get their full medical premiums paid for (24 versus 15 percent). For single coverage, teachers receive a medical care subsidy from their employers worth about $6,168 per year, or about $961 more than what private-sector workers receive, 18 percent higher. Teachers themselves chip in an average of $1,175 toward annual premiums, compared to $1,384 for private-sector employees. 

    For family plans, teachers contribute $257 more than non-teachers, school districts contribute about $600 less than private employers, and the total cost of the plans are nearly identical (and actually a couple hundred dollars higher for private-sector workers).

    Fact #3: Teachers receive medical coverage for a full calendar year, even though they may only work for 10 months. About 18 percent of teachers earn income from a second or third job to cover their mortgages or other household expenses, but when they seek outside employment, at least they don't need to worry about health care coverage. That is a protection not all workers have.

    Adding up all these factors, the average teacher receives health benefits that are much better than employees in other sectors. But those differences are mainly driven by universal coverage, not the generosity of the underlying benefits.

    *Throughout this post, I rely on data from the National Compensation Survey from the Bureau of Labor Statistics. For a more detailed overview, read this Education Next piece by Robert Costrell and Jeffrey Dean. 
  • In schools across the country, high teacher pension and benefits costs can crowd out other classroom spending. In Washington D.C., pension costs could pump the brakes on Metro services.

    A recent GAO report found that, from 2006 to 2017, WMATA’s required employer pension contributions increased an annual average of 18.9 percent -- from $25 million in 2006 to $168 million in 2017. During that same time period, salaries and wages increased only slightly -- an annual average of 1.1 percent. Today, WMATA’s pension system has a $1.1 billion unfunded liability. That’s in addition to $1.8 billion in health care obligations.

    The repercussions of this are fairly alarming. Metro Board Chairman Jack Evans told the Washington Post, “In five to 10 years, the amount of money that we have to pay out of the operating budget to fund the pension will be so high that we won’t be able to run the system.”

    For their part, the GAO recommends WMATA first develop a comprehensive assessment of their pension plans’ risks, presumably to inform future actions.

    The benefits squeeze on current employee wages is mirrored in the teacher workforce. As states funnel more resources toward unpaid pension debts, there’s less funding to increase salaries of existing employees.  

  • Earlier this week I had the chance to testify in front of a joint committee of the Arkansas State Legislature focused on Public Retirement and Social Security Programs. I used the opportunity to show that Arkansas' current plan offers solid benefits to long-serving veteran teachers, but it can leave 5-, 10-, or even 20-year veterans with insufficient benefits. My full presentation is below.

    After defining an "adequate" savings threshold, I compare it to the current Arkansas Teacher Retirement System (ATRS) plan, as well as two other types of plans, a defined contribution plan currently offered to employees at the University of Arkansas and a cash balance plan currently offered to retirees in the ATRS system. As I show in the slides, the current ATRS plan has sufficient contributions going into it, and it does provide adequate benefits to workers who stay in the system for their full career, but that leaves many public school teachers without adequate retirement savings. The majority of Arkansas teachers will need to make up the gap somehow, by saving more in other jobs, working longer, or suffering from a less-than-adequate retirement. In contrast, other types of plans could provide more Arkansas public school teachers with adequate retirement savings regardless of how long they stay. 

    I also urged Arkansas legislators to focus on questions of benefit adequacy rather than concerns about the plan's effects on teacher recruitment or retention. As we've written before, retirement plans appear to be a poor tool to shape the workforce, and other factors are far more important for how teachers make decisions about whether to enter or remain in the teaching profession. As a result, state leaders should prioritize how well their retirement benefits are meeting the needs of workers. The teaching profession is too large, and too important, to leave without adequate retirement benefits. Click through my full presentation on Arkansas below: 



    For more info on Arkansas' teacher pension plan, see our review of key data points here or visit the plan's website here