TQB: Teacher Quality Bulletin

Doing the Math on Teacher Pensions

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Just do the math and it is clear that things don't add up for teacher pension policies. NCTQ calculates that state teacher pension systems are a half trillion dollars in debt for 2014. Across the states, an average of 70 cents of every dollar contributed to state teacher pension systems goes to ever-increasing unfunded pension liabilities – and not to teachers' future retirement benefits.

Further, 38 states continue to cling to defined benefit pension systems that have become increasingly inflexible and unfair to teachers.

In our new report, Doing the Math on Teacher Pensions: How to Protect Teachers and Taxpayers, NCTQ provides report cards on teacher pension policies for each of the 50 states and the District of Columbia. We challenge the claims of pension boards and other defenders of the status quo about the cost-effectiveness, fairness and flexibility of the traditional teacher pension plan.

Overall, states earned a C- grade for teacher pension policies. Alaska earned an A for providing teachers with a fully portable retirement plan similar to a 401(k) as is commonplace in other professions. Five other states—Florida, Michigan, Ohio, South Carolina and Utah—offer teachers the option of a defined contribution plan.  But offering a defined contribution plan is not a prerequisite for a high grade.  South Dakota earned a B+ for a defined benefit plan that provides portability and flexibility, while maintaining a healthy funding level.

In fact, we find that only nine states have well-funded teacher pension systems, and even some of these may not be as well-funded as they appear. State efforts to improve the fiscal health of their pension systems have generally been at teachers' expense. Since 2008, more than half of the states have increased the amount teachers must contribute. To make matters worse, many states are also making it harder for teachers to receive benefits. Nationwide, fewer than half of teachers stay long enough in the state and districts where they teach to become eligible for retirement benefits. And 15 states make teachers wait 10 years to vest into their pension systems, resulting in too many teachers being cheated out of the opportunity to build an adequate retirement nest egg.

To learn more, download the report, see your state's report card, or search our dashboard.