Teachers Are Mobile and Need Portable Retirement Benefits

By 01/07/2015

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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.

To learn more about teachers and Social Security, read our new report and the condensed PowerPoint version. 

– Leslie Kan

This first appeared on teacherpensions.org

Comment on this article
  • Anna Dell'Olio says:

    I am confused by this article. The reason that the states have lengthened the vesting period from five to ten years is so that teachers DO NOT get vested and DO NOT qualify to receive a pension. The whole point of this modern neoliberal free market agenda is for people not to depend on the government and foster the idea that the government owes you nothing. So I am not sure what exactly you would be fighting for because this is exactly what the higher powers want. An educated, mobile, transient class of people who will do their job for the year and move on. So at the end of the year, the teacher is not owed anything and the govenrment is not responsible for anyone.

  • Scott M. Petri says:

    Why can’t teachers transfer their contribution, plus their state and district’s matching contributions when they move from state to state? Assuming a teacher contributes 8% and the district/state matches that 8%, a teacher averages a $50K salary over 10 years will have a balance of $80K in retirement funds, not counting interest, or capital gain. If someone teaches for 10 years in state X, then moves to state Y, they should be able to rollover that time into state Y’s pension system. Sounds like we need stronger Federal legislation. Eliminating the Social Security windfall provision would make a good first step.

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