Matt Chingos and Marty West have a new paper published by Fordham examining pension reforms in Florida. Specifically, Florida offered its new teachers the option of choosing between a defined benefit and a defined contribution retirement plan. The defined benefit plan is the type most commonly found for teachers and defined contribution is more commonly found for private sector workers.
Defined benefit plans have some unusual characteristics that may push some teachers out of the workforce before they really should leave and may keep others as teachers longer than they should. These defined benefit plans also reward long-serving and immobile teachers at the expense of shorter-serving and more mobile teachers, like those most commonly found in charter schools. And defined benefit plans shift all of the risk for achieving sufficient investment returns to the government, which given recently weak investment returns, government under-funding of plans, and overly generous promised benefits is putting many states in serious financial trouble.
So states like Florida are considering shifting more teachers to defined contribution plans, which are more like 401k plans where the employer and employee each contribute money to an investment account and then the employee bears the risk of investment returns.
Matt and Marty addressed four questions in their study: 1) What portion of new teachers have chosen the defined contribution (DC) option? 2) What kinds of new teachers were more likely to make that selection? 3) Did the teachers who chose DC more likely to be effective teachers? and 4) Is there a difference in attrition between new teachers who choose DC or defined benefits (DB)?
The quick answers are 1) Between a quarter and a third of new teachers chose DC. This is a surprisingly large share choosing DC, especially given that DB was the default option. 2) Teachers with more advanced degrees and degrees in math and science (presumably those with the most attractive options outside of teaching) were more likely to choose DC. 3) There was relatively little relationship between whether a teacher chose DC and their later effectiveness as measured by value-added scores. 4) New teachers who chose DC were more likely to leave their teaching positions.