Alabama has made changes to retirement plan provisions for its Teachers’ Retirement System (ALTRS), as presented in Alabama House Bill 134, passed on March 31, 2022 (and enacted into law on April 7, 2022). The stated intent of the legislation is to help improve the government’s ability to recruit and retain teachers.

Equable Institute has analyzed the proposed changes using Retirement Security Report methodology, and we report here how these changes to retirement benefits would influence current and/or future ALTRS plan members. Scorecards can be downloaded at the links below.

DOWNLOAD THE SCORECARD | EXTENDED SCORECARD

EQUABLE INSTITUTE’S ANALYSIS OF ALABAMA HOUSE BILL 134

The new retirement benefit design adopted via HB134 will have a small, positive effect for teachers who want to start drawing pension checks earlier than age 62. However, the positive effect is very small and does not change the fact that ALTRS Tier 2 offers very weak benefits and does not serve its members well.

  • Short-Term Workers are not served well by Tier 2, though the adopt of HB134 makes the plan slightly better (33.8% of available points versus 33.2% of Retirement Benefits Score points).
  • Medium-Term Workers are also not served well by Tier 2, but similarly are slightly better off due to the changes (41.7% of available points instead of the previous 41.4%).
  • Those who work a full career up to age 62 covered by ALTRS are not affected by the changes providing early retirement benefits.

While these numbers are improvements, they are also small enough changes as to be statistically insignificant.

The modification of retirement eligibility rules only applies to those who work at least 10 years to vest in benefits (less than 40% of new, 25-year-old teachers) and then those who work close enough to age 62 such that their early drawdown of benefits isn’t completely wiped out by the 2% per year reduction in benefit values.

Because the proposed pension plan does not provide meaningfully better benefits, it is unlikely that HB134 will achieve its stated goals.

Most academic literature suggests that few individuals join public service because of the retirement benefits, and other factors like salary, health benefits, and working conditions are stronger factors for retention than retirement benefits (no matter the plan design).