Young Teachers Deserve Retirement Protections, Too
Tamara Hiler, far left, with Third Way Colleagues in 2014. (Photo Courtesy Tamara Hiler)
How does it feel to lose $11,000 and know you’ll never get it back? This past week I discovered that I lost just that amount in retirement savings because like roughly half of America’s young teachers, I taught for fewer than five years.
Randi Weingarten, president of the American Federation of Teachers, made a startling admission on a recent segment of “Morning Joe.” She said fighting teacher tenure laws was pointless because most teachers in American classrooms today have less than two years of teaching experience. While that figure is a slight exaggeration toward the low end, Weingarten is right in recognizing that the teaching profession looks drastically different -- and newer -- from before.
Despite this, most teachers still find themselves paying into a pension system that is a relic left from a time when educators stayed in the same job in the same place for an entire career. Teachers in most states receive defined benefit pensions that are based on a backloaded formula that factors in salary and years of service: teachers receive minimal benefits in their early years, but are rewarded quickly and heavily as they near retirement age. The rules of these defined benefit plans reward longevity and punish mobility -- even mobility within the profession between school districts or states. It works if you stay in one place and keep teaching, but doesn’t if you switch careers or move out of state, which is what I did.
When I left a Los Angeles Unified School District classroom after three years and moved to Washington, D.C., I learned that three years of employer contributions to my retirement became three years of donations to someone else’s. Since California requires five years of teaching to vest in a pension (19 states require 10 years), I was only entitled to recoup the 8 percent annual contribution that was deducted from my paycheck each pay period. I was forced to cede back to the pension program the 8.25 percent of annual contributions that were made -- ostensibly on my behalf by my employer -- an amount totaling more than $11,000. Invested very conservatively, this money would be worth at least $35,000 when I get ready to retire one day – but realistically several times that based on historical returns or what state pension funds expect to earn.
Yet rather than being allowed to transfer this money, and by extension its future earnings through investment returns, into a much-needed retirement nest egg, that money is instead being used to pad state coffers for the increasingly smaller percentage of teachers who will receive big payouts from this system only after staying in the same career for decades. To add insult to injury, because teachers in California do not participate in Social Security, I also lost out on three years of contributions to that system that I will have to make up for later in my career.
Vesting protections and backloaded formulas were established to encourage retention. It’s not working with today’s workforce, and currently, these defined benefit pension systems are just serving to have newer teachers fund their senior counterparts’ retirement. In fact, over the last few years, states have actually been increasing their vesting periods to help pay for the underfunded liabilities in their pension systems knowing full well that doing so would result in nearly all newer teachers receiving little or no benefit. As a result, only one-fifth of teachers who enter the teaching profession today will end up collecting full retirement benefits. Is there anyone who would call that kind of system “generous” or fair?
This approach is no longer cutting it for today’s demographic of teachers. New teachers should be allowed to participate in more modern, portable options like cash balance plans, which accrue at a normal rate and can be taken by employees between careers and across state lines. The federal government should also protect new teachers by requiring states to cap how long it takes an employee to vest in their retirement system (something common in the private sector so employers can’t take advantage of employees).
More fundamentally, state and district policymakers must be free to have open and honest conversations about improving their pension systems without fear of political retribution, such as being placed on a “blacklist” like the one issued by the AFT earlier this year. Attempts to modernize the pension system can no longer be seen as trying to take things away from teachers, but rather, about recognizing that these outdated systems are abandoning the ever-growing population of new teachers. Any teacher who chooses to dedicate part or all of their career to working in America’s classrooms-- whether that’s three or 30 years -- deserves the ability to save for their retirement in the process.