ERIC Number: ED559321
Record Type: Non-Journal
Publication Date: 2014-Jul
Reference Count: 13
Evaluating Retirement Income Security for Illinois Public School Teachers. Public Pension Project Report
Johnson, Richard W.; Southgate, Benjamin G.
The financial problems afflicting the Illinois teacher pension plan have grabbed headlines. An equally important problem, though underappreciated, is that relatively few teachers benefit much from the plan. This report evaluates the pension benefits provided to Illinois public school teachers. The researchers project annual and lifetime pension benefits for teachers in both tiers of the state's retirement plan, assuming teachers earn average salaries over their careers and separate from state employment at the rates estimated by the plan actuaries. Results show that long-tenured teachers earn substantial pensions. Most teachers, however, do not work long enough to benefit much from the plan, because at least 25 years of service is required for most teachers to receive large pensions. Sixty-six percent of teachers in the more generous, prereform pension plan lose financially by participating in the plan because the pensions they earn are worth less than their required plan contributions. In the plan available to teachers hired in 2011 and later, 84 percent suffer financial losses by participating. Which teachers benefit most from the Illinois pension plan depends on when they are hired and how long they work. Nonetheless, the plan reduces lifetime benefits for most teachers who remain employed after the benefit eligibility age, encouraging them to retire, even if they are still willing and able to teach. Alternative plan designs, such as cash balance plans, that allow teachers to accumulate retirement benefits more gradually over their careers would distribute benefits more fairly and improve retirement incomes for many Illinois public school teachers.
Descriptors: Retirement Benefits, Teacher Retirement, Public School Teachers, Teacher Salaries, Tenure, Teacher Employment Benefits, Income, Teacher Recruitment, Teacher Persistence
Urban Institute. 2100 M Street NW, Washington, DC 20037. Tel: 202-261-5687; Fax: 202-467-5775; Web site: http://www.urban.org
Publication Type: Reports - Research
Education Level: N/A
Sponsor: Laura and John Arnold Foundation
Authoring Institution: Urban Institute
Identifiers - Location: Illinois