Study: Pensions Promote Quality Education

01/15/2019

Traditional defined benefit pension plans are a vital tool for attracting and keeping highly qualified, experienced public school teachers in the classroom, according to a new report from the National Institute on Retirement Security (NIRS). In addition, defined benefit pension plans ultimately aid local economies by being more cost-efficient and providing greater retirement security than 401(k) retirement accounts, the study concluded.

The study warned that shifting from pensions to 401(k) or other account-based plans, such as cash-balance plans or hybrid defined benefit/defined contribution plans, will increase teacher turnover, significantly reduce the retirement income of long-term teachers, and ultimately reduce consumer spending by those teachers.

"As teacher shortages worsen, policymakers should understand that pensions exert a clear retention effect on teachers,” the NIRS study said. “Retaining experienced teachers lowers teacher turnover, eases schools’ staffing pressures, and contributes to education quality."

Additionally, the researchers said that "a pooled pension is simply more efficient than individual investment accounts as a means of financing retirement for a large, multi-generational workforce."

The report focuses specifically on six states – Connecticut, Colorado, Georgia, Kentucky, Missouri and Texas – but the findings generally apply to most public school teachers. The six states examined were chosen to represent a mix of large and small systems in both Republican- and Democratic-leaning states across all regions except the West Coast.

The report, titled "Teacher Pensions vs. 401(k)s in Six States," noted that pensions "help compensate for lower pay in public school teaching." It also found that traditional, defined benefit pensions provide higher, more secure retirement income for eight out of 10 teachers compared to a 401(k)-style plan.

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