Distribution of Benefits in Teacher Retirement Systems and Their Implications for Mobility

Brief

Distribution of Benefits in Teacher Retirement Systems and Their Implications for Mobility

Abstract

Defined benefit pension systems concentrate benefits on career teachers and impose costs on mobile teachers. This study analyzes the magnitude of these effects. Compared to a neutral system, often about half of an entering cohort's net pension wealth is redistributed to teachers who separate in their fifties from those who separate earlier, with some variation across states. This implies large costs for interstate mobility. Teachers who split a thirty-year career between two pension plans often lose over half their net pension wealth compared to teachers who complete a career in a single system. Likely explanations include the relative influence of senior versus junior educators in interest group politics and a coordination problem between states.

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Cross-Center Initiative

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