Do teachers want traditional pensions?
Maybe not, is the answer from a recent poll of New York State teachers conducted by the Empire Center. The poll found that 70 percent of public-school teachers would have considered a defined-contribution retirement option had they been given the chance, and a quarter felt they definitely would have chosen a 401k-style plan over a traditional pension. Perhaps more interesting is the fact that most teachers (about two-thirds of those surveyed) felt such non-traditional plans were good retirement options, roughly the same number as approved of traditional pensions.
It's not clear that young workers value a benefit that many of them will never receive.
The cost of providing teacher pensions is on the rise in many states, New York included. It's also not clear that young workers value a benefit that many of them will never receive. Only a minority of educators teaches for a full career in the same pension system and receives the full retirement benefit offered.
The Empire Center poll asked teachers about one possible alternative, a hybrid plan that would provide a basic level of financial security through a small traditional pension, with a 401k-style individual account on top. Raegen Miller at the Center for American Progress has argued for cash balance plans, which are similar to traditional pensions but provide more portability and do not implicitly rob younger teachers by giving them poorer benefits relative to more experienced teachers.
The retirement "time bomb"is not going away, meaning policymakers in many states need to enact meaningful reforms to save teachers' benefits. It should strengthen their resolve to know that teachers are themselves open to change.
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About the Editor
Bernard Lee Schwartz Policy Fellow
Chris Tessone was a Bernard Lee Schwartz Policy Fellow and the Director of Finance of the Thomas B. Fordham Institute. He has strong interests in governance and education finance, especially teacher compensation and school facilities finance.
June 13, 2013