New study finds defined benefit plans give educational employers an effective recruitment tool and ensure retirement security for teachers.
Seems like a logical conclusion. So why are critics of defined benefit (DB) plans saying DB plans are ineffective and that they shortchange teachers?
The National Institute on Retirement Security recently released a detailed study conducted by Dr. Christian Weller, Professor of Public Policy at the University of Massachusetts Boston. The report, “Win-Win: Pensions Efficiently Serve American Schools and Teachers,” presents facts that show how DB pension plans are good public policy, in addition to enjoying overwhelming public support.
A quick summary of Dr. Weller’s findings:
- DB pensions provide important incentives for effective teachers to stay in the teaching profession.
- DB pensions ensure teachers save for retirement – avoiding the “do-it-yourself” investment strategy that does not work for everyone.
- DB pensions reduce income inequality for low- and middle-income earners due to the current structure of the tax system.
- DB pensions provide more retirement income and are less risky when compared to defined contribution plans.
The report concludes that DB plans are a key component of teacher compensation and it’s good public policy to offer them to educators.
Read the full report.
See PERA on the Issues, Independent Analysis: PERA Wins Gold