Pensions improve the quality of California's public education system and reduce turnover costs, according to a report issued by the National Institute on Retirement Security.
The report—"Three Rs of Teacher Pension Plans: Recruitment, Retention, and Retirement"—found that the average California State Teachers' Retirement System member retiring in 2009-10 retired at age 62, performed 27 years of service, earned a pension that replaces nearly 60 percent of their pre-retirement salary and does not earn Social Security benefits for their service.
"This study validates what has been a widely acknowledged practice in pension administration; there is a direct link between long-term, quality education and a defined benefit pension that provides retirement security," says CalSTRS Chief Executive Officer Jack Ehnes. "Teachers and administrators often tell us that the retirement security provided in a defined benefit pension is more important than immediate salary gains."
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Pension helped retain 1,825 teachers across the state, and because longer tenured teachers are more effective teachers, the increased retention that DB pensions bring increases the overall quality of California public education. The retention efforts of defined benefit plans also save school districts money. In 2003, defined benefit plans saved school districts across California $14,304 per teacher in turnover costs.
"Education policy literature is clear: Teachers become more effective as they gain experience," says Ilana Boivie, report author and economist with NIRS. "Research also shows that an essential tool for retaining these highly effective teachers is a pension benefit, which provides a modest, guaranteed income at retirement. Moreover, pensions help reduce substantially 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 California State Teachers' Retirement System, with a portfolio valued at $146.6 billion as of August 31, 2011, is the largest teacher pension fund and second-largest public pension fund in the United States. CalSTRS administers a hybrid retirement system, consisting of a traditional defined benefit, cash balance and defined contribution plan, as well as disability and survivor benefits.
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