Traditional pensions paid to teachers are greater in value than even an idealized 401 (k) plan (“New Study Analyzes Teacher Pension Plan in Six States,” The National Institute on Retirement Security, Jan. 9). Moreover, they play a critical role in retaining teachers.
Nevertheless, these traditional plans are not being fully funded, which puts them at great risk. The best example is Chicago. In April 2009, the Illinois General Assembly allowed the Chicago Public Schools to pay a fraction of the dollars owed and extended by 14 years the district’s contribution. As a result, funding of the pension plan was heading toward 50 percent instead of 100 percent.
This is a clear case of kicking the can down the road. But eventually there will be a day of reckoning. One way of solving the problem is to institute front-loaded compensation for teachers. That is the opposite of what now exists. For example, pay teachers much higher salaries in their early years and pay for it by reducing pensions. This might appeal to veteran teachers who are burned out but stay in the classroom.
I would not be interested in such a change because I knew from the start that I wanted to make teaching my lifetime career. But not all teachers want to do the same. Under current plan structures, teachers accrue almost no retirement wealth in their first several years. In Pennsylvania, for example, about 80 percent of teachers leave the system before their pension benefit is worth a single dollar.
If the goal is to recruit and retain the best and the brightest, it’s worthwhile giving teachers a choice between front-end loaded and back-end loaded pensions. The outcome may be surprising.
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