Defined benefit pensions best for California teachers, study shows
A study from University of California, Berkeley, shows that for the vast majority of teachers, the California State Teachers' Retirement System (CalSTRS) defined benefit pension provides a higher, more secure retirement income compared to a 401(k)-style plan. The study, conducted by Nari Rhee, manager of the Retirement Security Program at UC Berkeley's Center for Labor Research and Education, and William Fornia of Pension Trustee Advisors, shows that switching to an account-based retirement system - such as a 401(k) or cash balance plan - would sharply reduce the retirement income security of teachers who account for a majority of the educational workforce in California. "The security of a defined benefit plan encourages teachers to stay in the profession despite relatively low salary levels for a degreed career," said Rhee. "Yet it has the additional effect of encouraging retirement among older teachers to allow for new ones to enter the field." The report is available online. The researchers found that most classroom teaching in California is performed by long-career teachers who are well positioned to benefit from a traditional pension. The study ( Are California Teachers Better off with a Pension or a 401(k)? ) shows that overall, the CalSTRS pension structure, which is designed to benefit teachers who stay until at least early retirement age, better matches the needs of the active teaching workforce than either 401(k) or cash balance plans. The research was conducted for CalSTRS, the world's largest educator-only pension fund, which serves California's 429,000 active public school educators, from the state's 1,700 school districts, county offices of education and community college districts.
