The state should ensure that excessive resources are not committed to funding teachers' pension systems.
As of June 30, 2010, the most recent date for which an actuarial valuation is available, Delaware's teacher pension system is 96 percent funded and has a 20-year amortization period. This means that if the plan earns its assumed rate of return and maintains current contribution rates, it would take the state 20 years to pay off its unfunded liabilities. Both levels are better than regulatory recommendations, and Delaware's system is financially sustainable according to actuarial benchmarks.
However, Delaware commits excessive resources toward its teachers' retirement system. The current employer contribution rate of 9.27 percent is excessive, in light of the fact that the state must also contribute to Social Security. While this rate allows the state to keep its system well funded and pay off liabilities, it does so at great cost, precluding Delaware from spending those funds on other, more immediate means to retain talented teachers. The mandatory employee contribution rate to the defined benefit plan of 3 percent of income greater than $6,000 is reasonable. The rate will increase to 5 percent for those hired on or after January 1, 2012. This rate is also reasonable.
Delaware Public Employees' Retirement System, Thirty-Ninth Comprehensive Annual Financial Report, for the Fiscal Year Ended June 30, 2010 http://www.delawarepensions.com/financials/fy10cafr.pdf
Avoid committing excessive resources to the pension system.
While the state meets actuarial benchmarks for a financially sustainable system, it does so at great cost, precluding Delaware from spending those funds on other, more immediate means to retain talented teachers. The state should consider decreasing employer contributions to allow the state to spend those funds on other recruitment and retention strategies. However, it must be careful to maintain its funding level to allow for protection during financial downturns.
Delaware was helpful in providing NCTQ with facts that enhanced this analysis.