Florida fares slightly better than the national average when it comes to its teacher pension system, according to a new report released Tuesday from the National Council on Teacher Quality.
The NCTQ report analyzed state teacher pension policies for all 50 states as well as the District of Columbia in 2014 and doled out letter grades to each on funding, fairness and flexibility of teacher pension plans.
Nationally, the average state grade for teacher pension policy is a “C-.” But there’s good news for teachers in Florida: the Sunshine State fared slightly better, receiving a “B-” in the NCTQ report.
When teachers leave the classroom and say goodbye to their students and the teaching profession, they often face the overwhelming burden of too little retirement savings. Half of teachers leave their profession without a pension, or pension plans severely underfunded. And most teacher retirement plans aren’t flexible, says the report.
States were graded on several factors, including sustainability (how well-funded and stable the pension system is), flexibility (a flexible and fair system to all teachers), as well as fairness (offering retiree benefits to teachers uniformly with each additional year of work).
The Florida Retirement System, one of the largest in the country, offers two different types of plans for teachers in the state: a defined contribution (DC) plan and a defined benefit (DB) plan. The more portable and optional DC plan offers teachers a 401(k) style plan, which allows teachers and their employers to contribute to the retirement plan.
More than 621,000 state employees are actively participating in the program. School employees, including teachers, make up 49 percent of participants in the program.
In a DB plan, teachers receive a monthly payment for the remainder of their lives. The DB plan is the automatic default for new teachers in the Sunshine State, but a quarter of teachers instead have opted into the DC plan.
NCTQ says this is a significant statement that indicates teachers “value the flexibility that is associated with a portable plan.”
Florida’s teacher pension system nearly meets its goal of being well-funded. In order to be considered “well-funded,” systems had to be at least 90 percent funded. Only nine states met that mark this year. Florida fell slightly short at 88.5 percent.
Because the system is nearly well-funded, employer contribution rates remain relatively low — 6.1 percent in a DB plan and 3.3 percent in a DC plan.
When it comes to fairness, Florida nearly meets the goal of pension system neutrality. Teacher retirement is based on age only in the state’s DC plan, but pension benefits add-in a fair way for each year a teacher works. Teachers are eligible to retire at any time under the DC plan.
NCTQ Vice President Sandi Jacobs explained there’s a real issue with teacher pension plan funding — and one that needs to change so that teachers can receive what they need when they leave the classroom.
“The math on state teacher pension policy doesn’t add up,” said Jacobs. “The funding crisis is staggering, yet the structure of most states’ pension systems isn’t giving teachers what they need. Too often the debate around pension reform pits teachers against taxpayers or school districts or other public-sector employees. But pension reform is not a zero-sum game. There are ways to change the systems and to also give teachers what they deserve. Everyone loses – teachers most of all – when the pension crisis is ignored.”
To view Florida’s report card, click here.
Reach Tampa-based reporter Allison Nielsen by email at allison@sunshinestatenews.com or follow her on Twitter: @AllisonNielsen.
