Pension incentives and teacher retention (Cory Koedel, Brookings)

It is increasingly apparent that public defined-benefit (DB) pension plans, including teacher plans, across the United States are in a difficult financial situation. Chicago Public Schools is now routinely in the news for its precarious finances, owing in large part to pension problems. In a recent paper covered previously in this blog space, we document that on average across state plans, over 10 percent of salaries for new teachers are being collected and used to pay down previously accrued pension debts. Even more, there is growing awareness that pension plan reports are based on actuarial assumptions that make their financial conditions appear better than they actually are. The Citrus Pest Control District No. 2 in California learned this lesson the hard way when it tried to convert its workers from the state pension plan, CalPERS, to a 401(k) plan.

https://www.brookings.edu/blog/brown-center-chalkboard/2016/09/30/pension-incentives-and-teacher-retention/