Pension Sustainability: Wyoming

Retaining Effective Teachers Policy

Goal

The state should ensure that excessive resources are not committed to funding teachers' pension systems.

Nearly meets
Suggested Citation:
National Council on Teacher Quality. (2011). Pension Sustainability: Wyoming results. State Teacher Policy Database. [Data set].
Retrieved from: https://www.nctq.org/yearbook/state/WY-Pension-Sustainability-9

Analysis of Wyoming's policies

As of January 1, 2010, the most recent date for which an actuarial valuation is available, Wyoming's pension system for teachers is 87.5 percent funded and has an amortization period of over 30 years. This means that if the plan earns its assumed rate of return and maintains current contribution rates, it would take the state over 30 years to pay off its unfunded liabilities. While its funding ratio meets the recommended minimum standard, the state's system is not financially sustainable according to actuarial benchmarks.

Wyoming does not commit excessive resources toward its teachers' retirement system. The mandatory employee contribution rate to the defined benefit plan is 7 percent, and the current employer contribution rate is 7.12 percent. These rates are set by statute. Both of these rates are reasonable; however, they are close to excessive considering that teachers and local districts are also contributing to Social Security.

Citation

Recommendations for Wyoming

Ensure that the pension system is financially sustainable.
The state would be better off if its system had an amortization period of 30 years or less to allow more protection during financial downturns.

State response to our analysis

Wyoming recognized the factual accuracy of this analysis.

Research rationale

NCTQ's analysis of the financial sustainability of state pension system is based on actuarial benchmarks promulgated by government and private accounting standards boards. For more information see U.S. Government Accountability Office, 2007, 30 and Government Accounting Standards Board Statement No. 25.

For an overview of the current state of teacher pensions, the various incentives they create, and suggested solutions, see Robert Costrell and Michael Podgursky. "Reforming K-12 Educator Pensions: A Labor Market Perspective." TIAA-CREF Institute (2011).

For evidence that retirement incentives do have a statistically significant effect on retirement decisions, see Joshua Furgeson, Robert P. Strauss, and William B. Vogt. "The Effects of Defined Benefit Pension Incentives and Working Conditions on Teacher Retirement Decisions", Education Finance and Policy (Summer, 2006).

For examples of how teacher pension systems inhibit teacher mobility, see Robert Costrell and Michael Podgursky, "Golden Handcuffs," Education Next, (Winter, 2010).

For additional information on state pension systems, see Susanna Loeb, and Luke Miller. "State Teacher Policies: What Are They, What Are Their Effects, and What Are Their Implications for School Finance?" Stanford University: Institute for Research on Education Policy and Practice (2006); and Janet Hansen, "Teacher Pensions: A Background Paper", published through the Committee for Economic Development (May, 2008).

For further evidence supporting NCTQ's teacher pension standards, see "Public Employees' Retirement System of the State of Nevada: Analysis and Comparison of Defined Benefit and Defined Contribution Retirement Plans." The Segal Group (2010).