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