University professors are typically regarded as having one of the most desirable jobs in the country. Pay is usually high, benefits are good, and if they have tenure, then professors have excellent job security. Despite these benefits, professors still rely on employer-provided retirement plans to provide financial security in their golden years. A report from the American Association of University Professors (AAUP) reveals some stark divisions between the types of retirement plans offered to professors at public and private universities.
For their report, AAUP surveyed 567 colleges and universities. They were a mix of public (369) and private (198) institutions. Of the surveyed institutions, 42 percent offer a 401(k)-style defined contribution plan; only 12 percent offer a defined benefit pension plan; and 41 percent offer faculty a choice among either a defined contribution plan, a defined benefit plan, or both. The remaining 5 percent offer some kind of combination retirement plan.
What is particularly striking, however, is the division between public and private institutions. Of the universities offering a defined contribution-only plan, 76 percent were private. Of the universities offering a defined benefit-only plan, a whopping 94 percent were public. Similarly, 97 percent of the universities offering a choice were public. Clearly, private institutions have moved strongly toward 401(k)-style retirement plans, while public universities are still likely to offer a traditional pension plan.
This division among private versus public colleges & universities mirrors the divide between the private and public sectors more broadly. As we have documented before, the private sector has largely abandoned traditional pensions. The number of employees in the private sector who have access to a pension plan is significantly lower than it was three decades ago. Meanwhile, employees in the public sector- teachers, firefighters, nurses, and others- are much more likely to still have access to a defined benefit pension plan.
Professors participating in defined contribution plans face the same challenges as other workers in 401(k)-style plans. Last year several private universities were sued by their own employees for offering high-cost retirement plans. Professors need access to a secure retirement just as much as everybody else and at NPPC we believe that ALL Americans deserve to retire with security and dignity.