Teachers Are Mobile and Need Portable Retirement Benefits
By Leslie Kan 01/07/2015
The median U.S. worker has less than five years of experience at his or her current job. And teachers are no exception. Over the decades, teachers, like the rest of the American workforce, have become increasingly mobile. Unfortunately, teachers, who are the largest class of workers with a college degree, are still offered the retirement benefits as if they were a much more static workforce.
Fitting with national trends, teachers frequently move across state or district lines and change positions within and across sectors. The most common number of years a teacher has served in the profession has dropped from 15 years in 1988 to five years today. A person might start out as an elementary teacher and then move to curriculum publishing, or likewise might start out as an engineer and switch careers to teach. Or a teacher might teach in one state for a few years, then follow their spouse to another state and teach there.
Almost all teachers must participate in a state or district pension system. Traditional pensions, however, were designed decades ago, in some cases a century ago, and generously reward teachers who stay in the classroom for 30 or more years, while disadvantaging those who stay for less. Service requirements, known as “vesting” rules, require teachers to stay a certain number of years in the classroom in order to qualify for a pension. Most states have a 5 year requirement, while an increasing number of states have increased their vesting requirements upwards of 10 years. This means that a teacher can stay in the classroom for up to nine years and leave with nothing beyond a refund of her own contributions, sometimes with interest. Over half of teachers will not meet their state vesting requirements.
For teachers who move across states, the penalties are just as steep. Pensions aren’t portable, so a teacher who moves can’t just bring her pension or service years with her. Once she moves, her previous years spent teaching are erased and she starts back at square one with zero years of service on the clock. Technically, a teacher who has prior teaching experience can “buy” service years. But this turns out to be an expensive and pretty bad deal.
Put this all together, and traditional pensions simply aren’t cutting it for teachers. Teachers need stable retirement benefits that they can take with them wherever they go. Social Security provides exactly this: benefits are a low-risk, inflation-protected, lifetime annuity that move with a worker from job-to-job. Many teachers have Social Security coverage, but over 1 million (or 40 percent of the teaching force) lack coverage. States can and should improve their own retirement benefit offerings to teachers, but this still won’t replace Social Security. Teachers can benefit by diversifying their streams of retirement income, one of which should include Social Security.
We recently released a report that argues that teachers at all experience levels have much to gain from Social Security. While Social Security is not sufficient as a stand-alone benefit, extending coverage to teachers would be a positive step in the right direction.
– Leslie Kan
This first appeared on teacherpensions.org
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