Bruno: There Is No Teacher Pension Free Lunch
Josh McGee and Marcus Winters recently released a plan to reform teacher retirement plans.
Chad Alderman helpfully summarizes its two main components:
First, have "benefits accrue smoothly" over the entirety of a teaching career, rather than suddenly at the end of a long career.
Second, shift the allocation of compensation away from retirement accounts and into salaries "to match the norm for similarly situated workers in the private sector".
This is probably solid education policy. Teachers value their defined-benefit pensions, but probably not as much as they value an equivalent - or even somewhat smaller - increase in salary.
And as a relatively new teacher who has experienced some employment uncertainty, I'd certainly prefer to accumulate benefits more steadily and reliably.
Shifting away from generous defined-benefit plans may have some negative effect on teacher retention, but that would likely be at least partially offset by the retention (and recruitment) benefits of higher take-home pay.
Still, when reformers refer to this plan as a "free lunch", that's a little myopic.
It's important to remember that "good education policy" is not the same thing as "good policy" in general or "good retirement policy" in particular.
Teacher retirement plans are famously problematic, so it's natural enough to want to reform them. But the fact is that private sector retirement plans are a bit of a mess as well, with most plans providing only limited retirement security for most people.
In other words McGee and Winters are proposing sacrificing educators' retirement security to achieve a system that is in some respects more fair and - perhaps - educationally more efficient. So there is no "free lunch" here; the trade-off is very real.
So the McGee/Winters plan may very well be good education policy. And, absent additional revenue, teachers' defined-benefit pensions should probably be made somewhat less generous if for no other reason than to help keep them sustainable.
Nevertheless, private sector retirement plans are not obviously deserving of imitation. We may find that, like democracy, relatively generous defined-benefit pensions are the worst system except for all the others. - PB (@MrPABruno) (image source)