Across the country, state teacher pension systems are severely underfunded. According to the most recent data available, NCTQ estimates that teacher pension systems in the United States have almost $390 billion in unfunded liabilities. Funding shortfalls have grown in all but 7 states between 2009 and 2012.
- Pension underfunding is even worse than meets the eye due to unrealistic assumptions and projections about returns on investments. Even with states almost certainly overestimating how well funded their pension systems are, NCTQ finds that pension systems in just 10 states are, by industry standards, adequately funded.
- Retirement eligibility rules add to costs. In 38 states, retirement eligibility is based on years of service, rather than age, which is costly to states and taxpayers as it allows teachers to retire relatively young with full lifetime benefits. In the just ten states -- Alaska, California, Illinois, Kansas, Maine, Minnesota, New Hampshire, New Jersey, Rhode Island and Washington -- that no longer allow teachers to begin collecting a defined benefit pension well before traditional retirement age, states save about $450,000 per teacher, on average.
Teachers are being shortchanged
- Most pension systems are inflexible and unfair to teachers. Many assume that defined benefit pension plans are a clear win for teachers. But while most defenders of the status quo fight tooth and nail to preserve traditional pension plans, the reality is that these costly and inflexible models are out of sync with the realities of the modern workforce. Current pension systems are built on a model that assumes low mobility and career stability and helps to put public education at a competitive disadvantage with other professions.
- It takes too long for teachers to vest in defined benefit plans -- and it is getting longer across the states. All but three states make teachers wait more than three years; 15 states (up from nine in 2009) now make teachers wait for 10 years to vest in their pension plans.
- Since 2008, 27 states have increased the amount teachers must contribute to their pensions. In 38 states, teachers and/or districts are making excessively high contributions to their pension systems.
Explore: Learn more about the policy goals related to teacher pensions and teacher retention strategies, and see which states are setting best practices.
State findings: Check out how your state is doing in this area of teacher policy.
Get the full report on teacher pensions.
No One Benefits: How Teacher Pension Systems are Failing BOTH Teachers and Taxpayers