The ongoing crisis in teacher pension funding has led states to consider various reforms in plan design to replace the traditional benefit formulas, based on years of service and final average salary (FAS). One such design is a cash balance (CB) plan, long deployed in the private sector, and increasingly considered, but rarely yet adopted, for…

Public school teachers retire much earlier than comparable professionals. Pension rule changes affecting new teachers can be used to close this gap in the long run, but any effects will not be observed for decades and the implications for workforce quality are unclear. This paper considers targeted incentive policies designed to deter retirement…

State and local government decisions about how school funding is raised and allocated have profound impacts on American public education, and in recent years, experts have documented large increases in one type of spending in particular: public pensions. Because most data on school district pension expenditures are at the state level, it has so…

The value of pension benefits varies widely, by a teacher's age of entry and exit. This variation is masked by the uniform rate of annual contributions, as a percent of pay, to fund benefits for all. For the first time, we unmask that variation by calculating annual costs at the individual level. In California, we find that the value of a…

During the late 1990s public pension funds across the United States accrued large actuarial surpluses. The seemingly flush conditions of the pension funds led legislators in most states to substantially improve retirement benefits for public workers, including teachers. In this study we examine the benefit enhancements to the teacher pension…

This paper examines the savings behavior of public school teachers who are enrolled in a hybrid pension plan that includes a defined contribution (DC) component. Few states have incorporated DC features into teacher pension systems and little is known about how providing teachers with greater control over deferred compensation might affect their…

Since 2002, public school teachers in Florida have been permitted to choose between a defined benefit (DB) and a defined contribution (DC) retirement plan. We exploit this unique policy environment to study new teachers' revealed preferences over pension plan structures. Roughly 30 percent of teachers hired between 2003 and 2008 selected the DC…

Like most other state and local government employees, teachers participate primarily in defined benefit pension plans whose benefits are largely based on final average salaries and length of service. Such pensions have been replaced in many private sector firms by defined contribution pensions. A number of questions have arisen about the…

In this article we focus on two questions: How well do teachers understand their current pension plans, and what do they think about alternative plan structures? The data come from administrative records and a 2006 survey of teachers in Washington State. The results suggest that Washington's teachers are fairly knowledgeable about their pensions,…

While the retirement security landscape has changed drastically for most workers over the last twenty years, traditional defined benefit (DB) pension plans remain the overwhelming norm for K-12 teachers. Because DB plans pay off fully with a fixed income after retirement only if a teacher stays in the profession for decades and yield little or…

While it is generally understood that defined benefit pension systems concentrate benefits on career teachers and impose costs on mobile teachers, there has been very little analysis of the magnitude of these effects. The authors develop a measure of implicit redistribution of pension wealth among teachers at varying ages of separation. Compared…

The tension at the heart of pension politics is the incentive to satisfy today's claimants in the here and now at the expense of long-term concerns. Teacher pensions, in particular, pose two challenges. The first is that political incentives invite irresponsible fiscal stewardship, as public officials make outsized short-term commitments to…

Most public elementary and high school teachers are covered by health insurance provided by their employer while they are employed. In most cases, these health plans are managed at the state level. At retirement, teachers with sufficient years of service are allowed to remain in the health plan. Retiree health plans for teachers vary widely across…

The authors analyze the Arkansas teacher pension plan and empirically gauge the behavioral response to incentives embedded in that plan and to possible reforms. The pattern of pension wealth accrual creates sharp incentives to work until eligible for early or normal retirement, often in one's early fifties, and to separate shortly thereafter. We…

This article examines the pattern of incentives for work versus retirement in six state teacher pension systems. We do this by examining the annual accrual of pension wealth from an additional year of work over a teacher's career. Accrual of wealth is highly nonlinear and heavily loaded at arbitrary years that would normally be considered…