Teacher Pensions

Teacher Pension Plan Incentives, Retirement Decisions, and Workforce Quality

We analyze late-career teacher turnover induced by pension incentives. Using longitudinal data with performance measures for Tennessee public school teachers, we find higher quality teachers are less likely to retire conditional on age and experience. To quantify the effects of pension incentives, we estimate a structural model for retirement and find that high quality teachers have a lower disutility for teaching relative to retirement.

Labor Market Frictions and Production Efficiency in Public Schools

State-specific licensing policies and pension plans create mobility costs for educators who cross state lines. We empirically test whether these costs affect production in schools – a hypothesis that follows directly from economic theory on labor frictions – using geocoded data on school locations and state boundaries. We find that achievement is lower in mathematics, and to a lesser extent in reading, at schools that are more exposed to state boundaries.

Determinants of Cashing Out: A Behavioral Analysis of Refund Claimants and Annuitants in the Illinois Teachers’ Retirement System

This paper examines pension benefit choices made by public school teachers vested in the Illinois Teachers’ Retirement System (TRS) who quit teaching well before retirement eligibility. Teachers who separate have the option of keeping their funds in TRS and collecting a pension at a future date or withdrawing them (“cashing out”). We examine how variation in pension wealth at separation affects this decision, what that reveals about individual discount rates, and how these decisions are affected by teacher characteristics such as race and gender.

Teacher Pensions: Overview and Survey of the Research

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.

How Teachers Respond to Pension System Incentives: New Estimates and Policy Applications

Rising costs of public employee pension plans are a source of fiscal stress in many cities and states and have led to calls for reform. To assess the economic consequences of plan changes it is important to have reliable statistical models of employee retirement behavior. The authors estimate a structural model of teacher retirement using administrative panel data. A Stock-Wise option value model provides a good fit to the data and predicts well out-of-sample on the effects of pension enhancements during the 1990s.

Benefit or Burden? On the Intergenerational Inequity of Teacher Pension Plans

Most public school teachers in the United States are enrolled in defined benefit (DB) pension plans. Using administrative micro data from four states, combined with national pension funding data, we show these plans have accumulated substantial unfunded liabilities – effectively debt – owing to previous plan operations. On average across 49 state plans, an amount that exceeds 10 percent of current teachers’ earnings is being set aside to pay for previously-accrued pension liabilities.

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