State pension plans come in three varieties: defined benefit, defined contribution and hybrid / cash balance plans.
And again, our figures are not derived from speculative models, we use data from
the state pension plans themselves, which use the same data in their own financial calculations.
State pension plans assume that less than one - in - five teachers will survive long enough to truly benefit from today's back - loaded teacher pension plans.
In 2013, she published a law review article in the ABA Journal of Labor and Employment Law titled «Federal Regulations of
State Pension Plans: The Governmental Plan Revisited,» which explored the impact of federal rulemaking on the eligibility of quasi-public entities to offer state pension benefits to their employees.
And two, while there may be some late - career retention effect as teachers at the end of their career hold on in order to maximize their pension,
state pension plans assume a much larger «push - out» effects that causes large numbers of veteran teachers to retire at relatively young ages.
Here are four ways that
state pension plans limit a teacher's ability to choose her own path.
As Kelly Robson and I showed in a recent report for Education Next,
state pension plans themselves do not assume that qualifying for a pension is enough to alter teacher behavior.
Michael Hiltzik of the L.A. Times and Andrew Biggs of AEI had a spirited Twitter debate last week about whether
state pension plans were too generous or not generous enough.
According to their own data,
state pension plans say no, at least for the vast majority of teachers.
We can turn to individual
state pension plans to find more data.
To complicate things still further, the question of whether charter employees should be eligible to participate in
state pension plans remains unsettled.
Some charter operators have begun to explore how they might extricate themselves from
their state pension plans.
But if schools replace retirees with new teachers, who earn lower salaries and who pay into
state pension plans, these additional costs could be absorbed.
State pension plans are playing a role here as well.
For teachers (who make up over 60 percent of workers covered by New Jersey's
state pension plans) the current pension system disproportionately allocates benefits.
Current
state pension plans do not provide the majority of the teaching workforce with a secure retirement.
Podgursky, Pendergrass, and Hesla found that an increasing number of charters in these states, particularly those run by charter management organizations, opt out of
state pension plans to offer their own benefit.
Instead, these states bet they could provide better coverage through
state pension plans alone than through the combination of a pension and Social Security.
State pension plans that in the 1990s seemed like a good deal for start - up charter schools appear to be far less attractive today.
Nearly
all state pension plans failed to meet their target rates of return in the years following the financial crisis, which has necessitated sharp increases in contributions from employers and employees.
We find a growing number of schools, especially those run by management organizations, are choosing to opt out of
state pension plans.
* It's impossible for
state pension plans to act as a recruitment or retention incentive for individual public schools or districts within a state.
State pension plans offer all teachers a benefit that's distinct from all other workers.
In other words, teachers might prefer a different arrangement than current
state pension plans.
At a time when millions of babyboomer teachers are nearing retirement, their decisions on when to leave the classroom are guided more by the early - retirement incentives built into
state pension plans than by educational considerations, according to new research by a pair of economists.
Given the recent interest in Illinois»
state pension plans, it's worth your time to watch this video explaining how Illinois became one of the worst funded states in the nation and the consequences for the state's education funding:
Even in the places where charter schools are not required to participate,
state pension plans impose rules that disadvantage teachers who move into or out of the system.
In the fantasy world that the National Institute on Retirement Security has created,
state pension plans do a bang - up job of delivering benefits to workers.
State pension plans treat them all the same, and we end up in a situation where there are some big winners at the expense of lots of small losers.
Most
state pension plans for teachers have either a 5 - or 10 - year vesting requirement.
That's not merely our assertion — those are the actual estimates
state pension plans use to make fiscal decisions.
Their website is worth exploring and their «member profiles» illustrate how current
state pension plans disadvantage different types of teachers.
The comptroller insisted that most
state pension plans are sustainable for the long term, and said New York's fund is among the «best - funded and best - run» in the US.
The Colorado House passed an amended bill designed to improve the funded status of
the state pension plan and lower its overall risk.
,
the state pension plan does, too, and school districts, towns and villages, and other participants get a larger - than - normal bill.
It's an off - shoot of a big
State pension plan which happens to be one of the more underfunded pension funds in the country.
DiNapoli has long been opposed to
a state pension plan that included a 401K like plan for employees instead of a state pension.
«We are the best - funded
state pension plan in the country,» DiNapoli said.
He wants to change public pension plans from benefit - based to contribution - based and get all or new hires off of the current New York
state pension plan.
The money is part of an over $ 1 billion dollar fund that uses
the state pension plan monies to invest in locally based entrepreneurs who want to grow their business in the state.
Each state pension plan publishes a Comprehensive Annual Financial Report (CAFR), which includes withdrawal rate tables that estimate the percentage of teachers who will leave the system before they are eligible for normal retirement.
In our recent Education Next report, «Why Most Teachers Get a Bad Deal on Pensions,» my colleague Kelly Robson and I analyzed
state pension plan turnover assumptions to look at two key milestones, the point when teachers first qualify for a pension, and when they become eligible for normal retirement.
Aldeman: Our analysis of
state pension plan data suggests that vesting is not currently an incentive for teachers, and AFT has not refuted that central finding.
The opacity argument may explain part of Oregon's extreme situation, but it doesn't explain results like the one in St. Louis, or what we see in
state pension plan assumptions around vesting periods.
The Citrus Pest Control District No. 2 in California learned this lesson the hard way when it tried to convert its workers from
the state pension plan, CalPERS, to a 401 (k) plan.
This is merely an illustrative example, but Urban has run the calculations to find the break - even point for every large
state pension plan.
Based on our calculations from
state pension plan assumptions, the median state assumes that only 23 percent of teachers will stay for at least 24 years.
In states like California and Louisiana, charter teachers not in
the state pension plan also receive Social Security coverage.
The state pension plan was forced to start paying out benefits to teachers before it otherwise would have.
In some states, however, public charter schools provide an important alternative: charters have the flexibility to opt out of
the state pension plan and develop their own retirement plans.