Pensions are empty promises for most public-school teachers nationwide



By 05/16/2017

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Contact:
Chad Aldeman: 319-321-1925, chad.aldeman@bellwethereducation.org, Bellwether Education Partners
Jackie Kerstetter: 814-440-2299, jackie.kerstetter@educationnext.org, Education Next

Pensions are empty promises for most public-school teachers nationwide
Only 20% of teachers ever receive full benefits, while more than half receive nothing

May 11, 2017— Theoretically designed to attract teachers and incentivize them to stay on the job, states and districts now spend more than $50 billion each year on teacher pensions. Over the last twelve years, employer pension costs have more than doubled, from $500 per pupil in 2004 to over $1,100 per pupil in 2016. But in a new article for Education Next, Chad Aldeman and Kelly Robson of Bellwether Education Partners find that despite the widely held belief that pensions entice teachers to stay on the job, states base the financial health of their pension plans on the opposite assumption: they rely on high rates of teacher turnover in order to balance the books.

Aldeman and Robson reviewed pension plans and state projections based on historical data of teacher behavior across all 50 states, finding that although state plans depend on all teachers to contribute, they also count on only paying benefits to some of them:

• A minority of teachers vest in their pension plan. In the median state, fewer than half of incoming teachers will vest in their pension plan, making them ineligible to collect even a minimum pension payment (see figure).

• A majority of teachers never “break-even.” In 49 states, a majority of teachers will not break-even and will receive future pension payments worth less than their own retirement contributions (see figure).

• Only one in five teachers reach retirement age, at which point they qualify for the maximum pension benefit (see figure). After this point, their total pension wealth begins to decrease.

• Qualifying for a pension does not help retain teachers in the profession. Pension eligibility does not encourage early-career teachers to stay on the job. Multiple studies have further found that neither increasing nor decreasing pension benefits impacts turnover rates of mid-career teachers.

Pensions also don’t incentivize teachers to stay in the profession. Pension eligibility does not encourage early-career teachers to stay on the job. Multiple studies have further found that neither increasing nor decreasing pension benefits impacts turnover rates of mid-career teachers.

Plan rules push veteran teachers to retire and can encourage the wrong teachers to stay. The way in which pension wealth accrues encourages teachers who are nearing retirement eligibility to stay in the profession and encourages teachers who have reached retirement eligibility to leave the profession, regardless of their desire to continue teaching or their effectiveness on the job. “Current teacher pension plans are not working well for teachers, schools, or students,” the authors conclude. “[They] are neither improving the workforce nor providing teachers with adequate retirement savings.” The article outlines four suggestions for improving current teacher retirement systems.

An interactive graphic with state-by-state data on how many teachers benefit from state pension systems is available here.

To receive an embargoed copy of “Why Most Teachers Get a Bad Deal on Pensions: State plans create more losers than winners, and many get nothing at all” or to speak with the authors, please contact Jackie Kerstetter at jackie.kerstetter@educationnext.org. The article will be available Tuesday, May 16 on educationnext.org.

About the Authors: Chad Aldeman is a principal at Bellwether Education Partners. Kelly Robson is a senior analyst at Bellwether Education Partners.

About Education Next: Education Next is a scholarly journal committed to careful examination of evidence relating to school reform, published by the Hoover Institution at Stanford University and the Harvard Program on Education Policy and Governance at the Harvard Kennedy School. For more information, please visit educationnext.org.




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