Pension System Fails Most Teachers

Commonwealth Foundation
Contact: Gina Diorio, 862-703-6670, [email protected]

Study: Pension System Fails Most Pa. Teachers
New Study Confirms Status-Quo Pensions Don’t Help Retain Teachers

May 31, 2017, Harrisburg, Pa.—Generous public pension plans are touted as central to attracting quality teachers, but Pennsylvania’s pension system is not succeeding at keeping teachers in the system, a new study by Education Next confirms.

According to state government’s own projections, nearly two-thirds of teachers will not stay on the job for ten years, the point at which teachers "vest" in the defined benefit pension plan. Teachers who leave before the ten-year mark forfeit contributions the state made into the system on their behalf. In other words, only 36 percent of teachers are expected to collect full pension benefits.

Proponents of the unsustainable defined benefit model claim the pension plan is a great deal for most teachers. But Education Next research demonstrates how Pennsylvania’s pension system only serves those few teachers who remain in the system long enough to rack up back-loaded benefits. Barely one in four teachers in the commonwealth is projected to stay in the system for 25 years or more.

Unlike the current pension system, which benefits only a small percentage of teachers, a defined contribution plan would provide portable, flexible retirement benefits for all.

SB 1, which the Senate Finance Committee recently advanced, contains a defined contribution component alongside a smaller traditional pension for new hires. Notably, the bill allows both new hires and existing employees the option of enrolling in a defined contribution-only plan.

"The majority of teachers are gaining precious little from our current pension system," commented James Paul, senior policy analyst with the Commonwealth Foundation. "The promises may sound nice, but most teachers would fare far better with a system that gives them a return on investment from year one and allows them to take their retirement savings with them when they move or change careers.

"This finding underscores the benefit of moving to a defined contribution system for teachers. SB 1 begins to bring public sector retirement into the modern era. This commonsense reform is better for teachers and better for taxpayers."

James Paul and other Commonwealth Foundation experts are available for comment. Please contact Gina Diorio at 862-703-6670 or [email protected] to schedule an interview.

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