This post was originally published on October 24, 2017
Today the National Public Pension Coalition released a new report titled A School’s Choice: Retirement Security for Charter School Teachers. The report focuses on states where public charter schools have the option of participating in a public pension plan or offering their teachers an alternative retirement plan. In all states reviewed for the report, the alternative retirement plans offered by some charter schools fail to provide an adequate retirement for teachers and other school employees.
Not all states allow charter schools to choose what type of retirement plan to offer their employees. Forty-three states have authorized public charter schools and in twenty-three of those states, the charter schools are required to participate in the applicable public pension plan. It is only in the remaining twenty states that charters are given a choice. The report focuses on eight of those twenty states: California, Florida, Indiana, Louisiana, Michigan, North Carolina, Pennsylvania, and Wisconsin.
The report finds there is wide variation in the levels of participation in public pension plans. In states like California, the levels of participation are very high (89 percent of charters participate), whereas in states like Florida and Michigan, participation is very low (12 percent of charter schools in each state participate). For charters that opt out of the public pension plan, many offer 401(k)-style defined contribution plans, but some offer no retirement plan at all. Almost every alternative retirement plan reviewed for this report would leave a teacher short of the retirement income replacement level recommended by experts, even under the ideal conditions of a teacher taking full advantage of their employer match and earning a 6 percent return every year prior to retirement.
All teachers and public school employees deserve access to a secure and reliable retirement. Traditional public pension plans provide that. When states allow charter schools to choose not to participate in these pension plans, they deny teachers and other school employees access to a secure retirement. States must consider the impact that this lack of participation is having on our educators and on the long-term financial stability of public pension plans.