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ERIC Number: EJ879338
Record Type: Journal
Publication Date: 2010
Pages: 7
Abstractor: ERIC
ISSN: ISSN-1539-9664
Golden Handcuffs
Costrell, Robert M.; Podgursky, Michael
Education Next, v10 n1 p60-66 Win 2010
Teacher pensions consume a substantial portion of school budgets. If relatively generous pensions help attract effective teachers, the expense might be justified. But new evidence suggests that current pension systems, by concentrating benefits on teachers who spend their entire careers in a single state and penalizing mobile teachers, may exacerbate the challenge of attracting to teaching young workers, who change jobs and move more often than did previous generations. The design of teacher pension plans is a timely concern: like other public pension plans, those for teachers are becoming more costly. Employer contributions to pension funds tack on a larger percentage of earnings for public school teachers than for private-sector managers and professionals, and this gap is widening. Those data do not yet reflect the impact of the stock market decline since 2007: the drop in the value of pension funds means further increases in employer contributions will be required to fund promised benefits. As fiscal concerns force states to reevaluate the costs of teacher pension plans, officials might also consider the plans' consequences for teacher quality. In this article, the authors focus on the distribution of pension benefits among teachers of varying career lengths and the penalties for those who switch systems. They examine pension formulas in six state plans and develop measures of the redistribution of pension wealth from teachers who separate early to those who separate later. They compare existing defined benefit (DB) teacher pension systems to fiscally equivalent systems that treat all teachers equally and find that the former often redistribute about half the pension wealth of an entering cohort of teachers to those who separate in their mid-50s from those who leave the system earlier. The authors then show that this back loading produces very large losses in pension wealth for mobile teachers. Compared to a teacher who has worked 30 years in a single state system, a teacher who has put in the same years but split them between two systems will often lose well over one-half of her pension wealth. It is difficult to justify such a system of rewards and penalties on grounds related to fairness or teacher quality. (Contains 2 figures and 1 table.)
Hoover Institution. Stanford University, Stanford, CA 94305-6010. Tel: 800-935-2882; Fax: 650-723-8626; e-mail:; Web site:
Publication Type: Journal Articles; Reports - Descriptive
Education Level: N/A
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A
Identifiers - Location: Arkansas; California; Massachusetts; Missouri; Ohio; Texas
IES Funded: Yes
Grant or Contract Numbers: R305A060067