The overwhelming majority of public school teachers in the United States participate in traditional defined benefit pension plans. This year, however, Michigan and Pennsylvania both made significant and harmful changes to their pension plans for teachers and other public school employees. A recent report finds that pensions keep experienced, effective teachers in the classroom and reduce the costs of teacher turnover. Therefore, these changes in Michigan and Pennsylvania may negatively affect teaching in those states.
The new report from the National Institute on Retirement Security is actually an update of a paper they originally released several years ago. Titled “The Three R’s of Teacher Retirement Systems,” the report examines the impact of pension plans on recruitment, retention, and retirement of public school teachers.
We already know that pensions are highly valued by public employees. According to a report released in August, when given a choice among different retirement plans, public employees overwhelmingly choose pensions. This is true for teachers, as it is for other workers. One unique example highlighted in this report is the case of West Virginia. From 1991 to 2005, West Virginia enrolled all its new public school teachers in a 401(k)-style defined contribution plan, having closed its traditional pension plan. In 2005, however, the state reopened the pension plan and new teachers joined that plan. For the teachers hired during the fourteen years of the defined contribution plan, they were given a choice: they could stay in the defined contribution plan or they could joined the reopened pension plan. 78 percent of teachers joined the pension plan.
Offering pensions to teachers benefits more people than just teachers. Education policy research has shown that teachers increase their effectiveness during the first several years of teaching and mid-career teachers are the most effective. Pensions help to keep these mid-career teachers in the classroom. When these experienced teachers leave, the overall quality of teaching in the school drops as they are replaced with younger, less experienced teachers. There is also a financial cost associated with replacing a teacher. By keeping teachers in the classroom for the length of their careers, pensions help to reduce these turnover costs.
We’ll have more to say on teachers and their pensions in the weeks ahead. As more states like Kentucky, Oklahoma, and South Carolina consider potentially harmful changes to their teacher pension systems, they must consider the impact these changes could have on the quality of public schools in their states.
