Defined-Benefit Pension Plans and Teacher Retention from the National Institute on Retirement Security

“Pensions Improve Quality of U.S. Public Education System and Reduce Teacher Turnover. Magnetic Effect of Pensions Helped Retain 32,000 Teachers, Saved Up to $284 Million Nationally in Turnover Costs.

“WASHINGTON, D.C., September 25, 2017 - A new research brief analyzing the effectiveness of defined benefit (DB) pensions on teacher retention and productivity finds that pensions play a critical role in recruiting and retaining highly productive teachers. As a result, pensions help increase schools' effectiveness, which benefits students. Additionally, DB pensions save school districts money by reducing expensive teacher turnover costs.

“These findings are contained in a new research brief from the National Institute on Retirement Security (NIRS), Revisiting the Three Rs of Teacher Retirement Systems: Recruitment, Retention and Retirement.

• Download the research here.
• Read a summary PowerPoint here.

“‘The reality we face is that the nation's schools continue to struggle with a growing shortage of teachers, and that teachers are paid on average as much as 60 percent less than similarly educated professionals across the globe,’ says Diane Oakley, NIRS executive director. ‘Pensions play an essential role in recruiting and retaining our best and most experienced teachers. It's critical that states continue to leverage the magnetic effect of pensions to help students achieve at their highest potential.’

“Recent NIRS research finds that public employees prefer pensions over 401(k)-type plans and that Americans strongly support teacher pensions to help address recruiting problems and the deep wage gap.

“The new research brief finds that:

• Teacher effectiveness increases with experience. Thus, the more retention that we see among midcareer teachers, the more that the average productivity within a school will increase.

• The cost of teacher turnover is quite high, both in terms of financial cost and loss of productivity to the school district.

• Defined benefit pension plans help to recruit high quality teachers, and to retain highly productive teachers longer, as compared with defined contribution (DC) accounts.

• In 2009, DB pensions helped to retain an additional 30,000 teachers nationwide. Because longer tenured teachers are more effective teachers, the increased retention that DB pensions bring increases the overall quality of public education.

• Because the cost of teacher turnover is substantial, the retention effects of DB pension plans also save school districts money. In 2009, DB pensions saved school districts between $131 million and $284 million nationally in teacher turnover costs.

“The National Institute on Retirement Security is a non-profit, non-partisan organization established to contribute to informed policymaking by fostering a deep understanding of the value of retirement security to employees, employers and the economy as a whole. Located in Washington, D.C., NIRS' diverse membership includes financial services firms, employee benefit plans, trade associations, and other retirement service providers. More information is available at www.nirsonline.org. Follow NIRS on Twitter @nirsonline. Contact: Kelly Kenneally | kkenneally@nirsonline.org | 202.457.8190.”