Why Education Advocates Should Invest in Pension Reform
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Transcript of Why Education Advocates Should Invest in Pension Reform
![Page 1: Why Education Advocates Should Invest in Pension Reform](https://reader034.fdocuments.us/reader034/viewer/2022052116/587944711a28ab23468b6e5b/html5/thumbnails/1.jpg)
Why Education Advocates Should Invest in
Pension Reform
Chad Aldeman
![Page 2: Why Education Advocates Should Invest in Pension Reform](https://reader034.fdocuments.us/reader034/viewer/2022052116/587944711a28ab23468b6e5b/html5/thumbnails/2.jpg)
As an education advocate, your
work is driven by improving
outcomes for kids. Current teacher
pension plans are working against
that goal.
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Why pensions and not… Common Core? Charter schools?
Teacher prep?
• Pensions are a cost barrier to everything else you want to do
• Pensions are bad for:
• All new teachers (because of legacy costs)
• Teachers who work less than a full career (25 or 30 years)
• Any group of teachers with high turnover (charters, some
subjects, certain geographic areas)
• Pension reform poses fewer implementation challenges than other
policies (e.g. teacher evals or Common Core)
• Reform would be good for teachers, schools, and taxpayers
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First, you’re all feeling this in your state: Defined benefit
pension costs are high and volatile
0
5
10
15
20
25
1978-79 1983-84 1988-89 1993-94 1998-99 2003-04 2008-09 2013-14
Example: New York State Teachers' Retirement System Employer Contribution Rates (Percent of Salaries)
Above 20% in
the early
1980s A low of
0.36% in the
early 2000s
Rising again, it was
17.5% in 2014-15
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Pension costs now eat up more than $1,000 per pupil. That
money can’t be spent on other things (e.g. teacher salaries)
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Most of the cost increases are going toward paying off
pension debt, not actual benefits for teachers
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The Multiplier
(2 percent)
Salary
($50,000)
Years of Experience
(25 years)
Annual Benefit
($25,000)
Worse, pensions are contributing to inequities, because
teachers themselves are inequitably distributed
• Teachers are inequitably distributed according to almost every
variable—experience, salary, etc.
• Pension formulas rely on these same components. They literally
multiply those factors together, like this:
• So, while all districts share the costs of pensions, the benefits
mainly accrue to places with more higher-paid, veteran teachers
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Moreover, pension plans don’t serve most teachers well
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
25 30 35 40 45 50 55 60 65 70 75Age
Teacher Pension Wealth, By Age
Very little retirement
savings for early-
and mid-career
Pension
wealth
spikes
Pension
wealth
declines
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Back-loaded pension plan structures don’t match the
teaching workforce
0
0.2
0.4
0.6
0.8
1
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
25 30 35 40 45 50 55 60 65 70 75
Age
Teacher Retention Versus Pension Wealth
Percentage of
Teachers
Remaining
Pension Wealth
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Most teachers would be better off in a more portable
retirement plan
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What can education advocates do
to fix these problems?
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Be the voice in your state advocating for solutions that
address both the financial AND human capital problems
• There’s no magic solution to paying off existing debts, but states
should strive to:
• Share the debt burden as widely as possible, it’s not just the
responsibility of teachers or schools
• Find a dedicated revenue stream
• At the same time, states should stop making the hole bigger:
• ALL teachers deserve a path to a secure retirement
• Social Security should be part of the solution (teachers in 15
states don’t participate)
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Help your state stop making the pension problems worse
• Give your teachers a choice (given rapid teacher turnover, the
default should be a portable plan)
• There are multiple ways to provide simple, transparent retirement
benefits that incorporate protections for teachers:
• “Nudge” teachers toward adequate savings habits
• Ensure plans are professionally managed with low fees
• Utilize annuities to provide teachers with help drawing down
assets in retirement
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For more information, visit:
Follow us on Twitter
@TeacherPension