Review: Changing Pension Systems to Attract Best Teachers and Cut Costs Puts Cart before the Horse
EAST LANSING, MI (November 22, 2011) –The Center for American Progress (CAP) recently released two reports that consider the potential benefits and detriments of scrapping traditional defined benefit pension plans for teachers in favor of cash balance plans. A new review of the reports finds that while they have some limitations, they raise important issues in the face of limited knowledge.
The reports were reviewed for the Think Twice think tank review project by Teresa Ghilarducci, a nationally recognized expert on pensions and a professor of economics at the New School for Social Research and Director of the Schwartz Center for Economic Policy Analysis.
The review was produced by the National Education Policy Center (NEPC), with funding from the Great Lakes Center for Education Research and Practice.
The two reports examine the potential costs and benefits of defined benefit and cash balance pension plans. One report argues that switching to a cash balance plan might have benefits, while the other warns that this approach would likely end up costing more and creating incentives for the exit of peak-performance teachers from the profession. Both reports, however, conclude that current teachers' benefits should not be cut and that, if states convert to a cash-balance plan, they should maintain average pension benefits and strive to not cut benefit costs.
Ghilarducci notes that both reports have their merits and both acknowledge the relatively scant research that currently exists on the questions they raise. She concludes, "These two reports are valuable contributions, not so much because of the proposals they set forth but as flags for the complicated and sometimes counter-productive effects of many current proposals."
Find Teresa Ghilarducci's review on the Great Lakes Center website at:
The review is also available on the National Education Policy Center website at:
The mission of the Great Lakes Center is to improve public education for all students in the Great Lakes region through the support and dissemination of high quality, academically sound research on education policy and practices.