Teacher Pensions: Overview and Survey of the Research

Year: 
2016
Working Paper Number: 
WP 16-06
Abstract: 

Most educators in the United States receive retirement compensation via a subnational defined-benefit (DB) pension plan. These plans exert strong “pull” and “push” incentives over the course of the career and concentrate teacher retirements at relatively early ages compared to other professions. They also impose sharp penalties on geographically mobile teachers. Teacher pensions are a large and growing cost of public education. There are several reasons for the rising costs, but the biggest reason is that the unfunded liabilities of most plans are growing. The growth in unfunded liabilities is facilitated by the decoupling of contributions and benefits at the individual level, and represents a shift of wealth from young to older teachers in the United States. In response to fiscal pressures some states are changing their plans, primarily for new teachers.

JEL Codes: 
H17, I2, J6