DB plans help recruit, retain highly productive teachers

Defined benefit pensions play a critical role in recruiting and retaining highly productive teachers, according to a study by the National Institute on Retirement Security.

Teacher effectiveness increases with experience and teacher productivity increases sharply within the first few years of teaching, the report finds. “The more retention that we see among mid-career teachers, the more that the average teacher productivity within a school will increase,” the report says.

The cost of teacher turnover is high both financially and in terms of loss of productivity to the school district. Public school teachers turn over less than private school teachers, largely due to their compensation, including pension benefits, the report finds.

Defined benefit pension plans help recruit high-quality teachers and help retain highly productive teachers longer, compared with defined contribution accounts.

In 2003, defined benefit pension plans helped to retain 22,000 teachers nationwide. Because longer tenured teachers are more effective teachers, the increased retention that defined benefit pensions bring increases the overall quality of public education.

In 2003, defined benefit pensions saved school districts $273.2 million nationally in teacher turnover costs, according to the study.

“Because DB pensions play an important role in the retention of highly productive teachers, pensions have the dual benefit of both increasing the overall quality of our public education system while also reducing the costs to taxpayers," the study says. "These findings are particularly important considerations for policymakers given the economic challenges facing states and localities as they attempt to keep taxpayer costs low while improving education for American children."

Defined benefit plans are highly valued in the public sector because these employees “tend to receive less compensation than their private sector counterparts." In addition, 27 percent of all state and local employees and 40 percent of all public school teachers are not covered under Social Security. Their pension benefits will be their only source of guaranteed income in retirement. Across industries and sectors, research shows that employees still place a high value on their DB pension benefits.

"Education policy literature is clear: teachers become more effective as they gain experience," says Ilana Boivie, report author and economist with the National Institute on Retirement Security. "Research also shows that DB pension benefits, which provide a modest, reliable income in retirement, are an essential tool for retaining these highly effective teachers. Moreover, pensions help reduce the high cost of teacher turnover to school districts and taxpayers. These cost savings are a particularly important consideration for state and local policymakers striving to improve education, yet continuing to struggle with highly strained budgets."  

The National Institute on Retirement Security is a not-for-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 through national research and education programs.

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