"Halting a Runaway Train" looks beyond K-12 to resolve the pension crunch

This is the second in a series of blog posts introducing Fordham's latest report, Halting a Runaway Train: Reforming Teacher Pensions for the 21st Century.

So where should leaders and policymakers go for examples of how to fix teacher pensions? And what exactly does successful pension reform look like? It turns out that some of the most instructive examples don't involve K-12 education at all, as author Michael B. Lafferty looks to the likes of IBM, the federal government, and the University of Missouri for answers.

The feds lead the way. While 80 percent of state and local workers participate in defined-benefit (DB) retirement plans, the largest government in America shifted away from the DB model a quarter century ago. During the Reagan years, the feds began enrolling all new hires in plans that combined the DB and defined-contribution (DC) models, while allowing existing employees to transfer as well. Not always known for its forward-thinking, the federal government actually offers an early blueprint for public-sector pension reform and a primer on making the most of a bleak fiscal situation to drive needed change.

IBM: Lessons from the business world. While DB pensions are the norm for teachers and most other public employees, they are increasingly endangered in the private sector?the proportion of American private-sector workers at medium and large firms with DB plans has shrunk from 80 percent in the 1980s to less than 30 percent today. IBM exemplifies both that shift and the challenges, legal and organizational, which come with it. Big Blue demonstrates the importance of both adaptation and communication with stakeholders for organizations looking to fix their pension problems.

Mizzou offers Pension Reform 101. Higher education in Missouri can teach the K-12 sector some hard-learned lessons, with the state university finalizing its rocky transition from a DB plan to a hybrid DB / DC model for new employees this fall. The Tigers' experiences drive home the roles of strong organizational leadership, compromise, and proactive planning in addressing concerns over pension.

For more details on each of these examples and others, download a copy of Halting a Runaway Train: Reforming Teacher Pensions for the 21st Century, and keep an eye out for upcoming analysis of the report on Flypaper.

-Tyson Eberhardt

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