A recent report by Bellwether Educational Partner’s project Teacherpensions.org highlights a growing trend regarding American Teacher Retirement Systems, specifically regarding pension funds. The report entitled “Retirement Reality Check: Grading State Teacher Pension Plans” explains that “there is a growing disconnect between plans in the private and public sectors.” Whereas plans in the private sector have made meaningful improvements, public-sector workers, including teachers, have plans that are faring worst.
Cuts made during the recession have contributed to added pressure on teacher’s pensions due to lack of funding sources. In addition, in an attempt to reap higher gains, public pension funds have poured money into high-fee investments. Rising unfunded liabilities are also eating away at state and district budgets. This could result in the lowering of salaries for public workers like teachers.
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The report goes on to explains that current teacher retirement systems are designed to disadvantage young and mobile teachers. This harms local districts seeking to recruit and retain top talent. The retirement plans currently in place reward teachers who remain sedentary and within the retirement system. This is due to the nature of teacher retirement systems which feature defined benefit plans that determine teachers benefits based on years of service, age of retirement and final compensation. Often these plans are tied to the state or even the district the teachers works. Teachers could potentially lose half of their retirement wealth if they move.
Furthermore, in defined benefit pension systems, is the disconnect between promised benefits and monies that are actually available. According to the report, there is a current gap between what states have saved and what they have promised to teachers of $499 billion. Most of the contributions into teachers pensions plans goes toward amortized cost to pay down existing deb- Creating a scenario where many teachers will not obtain their expected payouts. In fact, because of vesting requirements “half of all beginning teachers will not qualify for any pension at all.” The report goes on to rank states by pension systems that leave teachers the most vulnerable. You can view the complete report here.
H/T pointsnfigures ?