Targeted
benefit enhancements for Social Security recipients who need them most certainly should be considered in the context of a reform plan, and indeed they have been included in a number of bipartisan plans put forward in recent years.
According to this analysis
of benefit enhancements in Missouri, teachers who stay in one system for an entire career.
This means that contributions include both the «normal cost» of pension liabilities accruing to current employees and the legacy costs of amortizing unfunded liabilities accrued previously (due to a variety of reasons, including the original pay - as - you go nature of most plans, as well as unfunded
benefit enhancements over the years).
In teaching, by contrast, early retirement incentives have a completely different origin, namely legislatively
enacted benefit enhancements, typically under heavy union lobbying.
Sure enough, in February, the pilots ratified a deal that gave them immediate raises averaging 43 %, plus
other benefit enhancements.
Upon the passage of the enhancements, these teachers actually delayed their retirement, remaining in the classroom for one additional year, and so were able to reap the
large benefit enhancements.
When a
new benefit enhancement for California teachers created a financial windfall for teachers with 30 years of experience who were exactly 61 1/2 years old, the percentage of teachers retiring at the relatively odd age of 61 1/2 doubled.
The company's «Classic» family of plans includes a base plan as well as
optional benefit enhancements such as Required to Work, which provides benefits for specific work obligations; and Trip +, which has double the coverage limits compared to the base plan.
But they do tell us that teachers and district employees are forgoing wage increases on behalf
of benefit enhancements.
Trudeau, Morneau and others in the government have been clear that their tax cuts and
benefit enhancements are primarily about relieving anxiety, not driving demand.
But there is evidence that
benefit enhancement has generally abated in recent years.
Ohio's multiple - spiked system also reflects its history of
benefit enhancements; it used to have a single spike at age 60.
The dotted lines on Figures 2d and 2e indicate the pattern of accrual prior to
benefit enhancements enacted by the legislatures in California and Massachusetts.
Even for a newly entering teacher who stays for an entire career (a very low probability), the teacher's expected pension wealth is still worse off than if she did not have
the benefit enhancement and could pay the lower contribution rate.
The new contribution rate increases do not significantly impact teachers who were teaching prior to
the benefit enhancements, because they already worked most of their careers without the higher rates.
You should read the full paper, but to show the effect of
the benefit enhancements for mid - and late - career teachers I created the gif below from the authors» Figure 1.
However, to pay for
the benefit enhancements and a falling stock market, Missouri has been forced to increase teacher contributions to the pension plan.
In this study we examine
the benefit enhancements to the teacher pension system in Missouri.