Published Online: March 5, 2013
Published in Print: March 6, 2013, as Pension Plans

Report Roundup

Pension Plans

"When Teachers Choose Pension Plans"

Certain kinds of teachers, including those teaching math and science, may be more likely than others to select a 401(k)-style teacher-pension plan over a traditional pension plan given the choice.

That's the key finding from an analysis of Florida data released last week by the Thomas B. Fordham Institute, a conservative-leaning Washington think tank. The authors analyzed state data from 2002-03 and 2008-09 on 75,000 Florida teachers.

During that time, new teachers had the option of enrolling in either a defined-contribution plan similar to a 401(k), in which wealth is based on how selected investments perform, or a defined-benefit pension plan, in which pension wealth is based on final salary and years worked.

The vesting period was much shorter for the defined-contribution plan (one year) than the defined-benefit plan (six years), and portable. But, after about six years, the value of the defined-benefit plan was projected to exceed its alternative.

The study found that the defined-contribution plan was favored by: more black and Hispanic teachers than white teachers; more mathematics and science teachers than teachers of other subjects, and more charter than noncharter teachers, among others.

Teachers choosing that option were also no more- or less-effective than others.

The Fordham center, a critic of defined-benefit programs, said the findings show that teachers aren't entirely opposed to defined-contribution plans, which might save districts money.

Vol. 32, Issue 23, Page 5

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