Chapter 13: Recent Research on Teacher Pension Funding, Benefits, and Policy Debates

Teacher pension funding and benefit design are technical subjects, but since they increasingly impact all areas of education policy, it is valuable for education researchers and practitioners to keep abreast of these issues. This chapter begins with a brief overview for non-specialists of the basics of traditional pension benefits and funding. We then go on to survey recent developments in teacher pension funding, benefits, and current debates over funding policy and plan design. The key issues we survey include: the high and rising costs of funding pension debt, which are squeezing salary growth and other classroom expenditures; the uneven distribution of benefits between career teachers and young and mobile teachers; the intergenerational tradeoffs in funding policy; and the hidden costs of risk. Tying all of these issues together is the fundamental challenge of funding retirement benefits with investment in risky assets. We conclude with a discussion of alternative pension designs that states are increasingly considering.